Question
Nyamalo, Bob and Chebet are in partnership sharing profits and losses in the ratio 3:2:1 respectively. The balance sheet for the partnership as at 30
Nyamalo, Bob and Chebet are in partnership sharing profits and losses in the ratio 3:2:1 respectively.
The balance sheet for the partnership as at 30 June 2021 is as follows;
Fixed Assets | ||
Premises |
| 90,000 |
Plant |
| 37,000 |
Vehicles |
| 15,000 |
Fixtures |
| 2,000 |
|
| 144,000 |
Current Assets |
|
|
Stock | 62,379 |
|
Debtors | 34,980 |
|
Cash | ___760 | 98,119 |
|
| 242,119 |
Capital |
|
|
Nyamalo |
| 85,000 |
Bob |
| 65,000 |
Chebet |
| 35,000 |
|
| 185,000 |
Current account |
|
|
Nyamalo | 3,714 |
|
Bob | (2,509) |
|
Chebet | 4,678 | 5,883 |
|
|
|
Loan Chebet |
| 28,000 |
|
|
|
Current liabilities |
|
|
Creditors |
| 19,036 |
Bank overdraft |
| 4,200 |
|
| 242,119 |
Chebet decides to retire from the business on 30 June 2021, and Kinyua is admitted as a partner on that date. The following matters are agreed:
- Certain assets were revalued;
- Premises 120,000
- Plant 35,000
- Stock 54,179
- Provision is to be made for doubtful debts in the sum of 3,000.
- Goodwill is to be recorded in the books on the day Chebet retires in the sum of 42,000. The partners in the new firm do not wish to maintain a goodwill account so that amount is to be written back against the new partners capital accounts.
- Nyamalo and Bob are to share profits in the same ratio as before, and Kinyua is to have the same share of profits as Bob.
- Chebet is to take her car at its book value of 3,900 in part payment, and the balance of all she is owed by the firm in cash except 20,000 which she is willing to leave as a loan account.
- The partners in the new firm are to start on an equal footing so far as capital and current accounts are concerned. Don is to contribute cash to bring her capital and current accounts to the same amount as the original partner from the old firm who has the lower investment in the business.
The original partner in the old firm who has the higher investment will draw out cash so that her capital and current account balances equal those of her new partners.
Required;
- Account for the above transactions, including goodwill and retiring partners accounts.
- Draft a balance sheet for the partnership of Nyamalo, Bob and Kinyua as at 30 June 2021. (20 marks)
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