Melinda and Melissa are partners in a clothing design shop trading as M&M Boutique. They share profits and losses in the ration 2:1.

On 30 June 2017, the statement of financial position was as follows:

M&M Boutique
Statement of financial position as at 30 June 2017
		N$	N$
Asse ts
Non-Current Assets
Land & Building			300,000.00
Vehic les			60,000.00
Goodwill			90,000.00
Furniture			30,000.00
		-	480,000.00
Current Assets
Inventories		144,000.00
Trade Receivable		186,000.00
Bank		27,000.00
		357,000.00	357,000.00
Total Assets			837,000.00
Equity and Liabilities
Equity
Capital: Melinda			450,000.00
Capital: Melissa			225,000.00
Total Equity			675,000.00
Non-current liabilities
Long-term borrowings			120,000.00
Current Liabilities
Trade payable			42,000.00
Total current liabilities			42,000.00
Total liabilities			162,000.00
Total equity and liabilities			837,000.00

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On 1 July 2017 the decided to admit Melintha to the partnership on the following conditions: a) Assets should be re-valued as follows:

i. ii. iii. iv. v. vi.

2. b) Melintha will

   premium for good will for her share.

3. c) Melinda and Melissa will share the remaining profits in the ratio 3:2. Melinda and

   Melissa must make cash payments/withdrawals in order to get their capital balances in

   line with their profit-sharing ratio.

4. d) Goodwill should not be disclosed in the statement of financial position after admitting

   Melintha.

You are required to:

1. Calculate the new profit sharing ratio after admission of Melintha on 01 July 2017. ( 4 marks)

2. Provide the journal entries of the transactions above. ( 11 Marks)

3. Prepare the capital accounts of the partners in columnar format. (9 marks)

4. Prepare a statement of financial position of a partnership on 30 June 2017. ( 8 Marks)

5. Discuss in short four reasons for the formation of partnerships ( 4 Marks)

Land & buildings Vehicles Furniture Goodwill Inventory

N$ 360, 000.00 N$ 54, 000.00 N$ 16, 000.00 N$ 120, 000.00 N$ 132, 000.00 N$ 180, 000.00

Trade receivable obtain 1/5 share of partnership and it was agreed that she would pay a

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