Question 1 (70 marks) Lee, Kong and Chan, who share profits and losses in the ratio of 1:3:4, decided to terminate their partnership as at 31 December 2018. Any deficiency in capital after realization will be shared by other partners according to the profit or loss sharing ratio. Additional Information: Their statement of financial position on that date was as follows: 1. Non-current assets 2. Building 900,000 3. The building and equipment were sold at 50 percent and 60 percent of their book value, respectively. Lee took over the inventory at 50 percent of its book value. He agreed to pay off the accounts payable personally. Chan collected the accounts receivable on behalf of the partnership. He was entitled to the commission of 10 percent on the total amount received. $2,000 of accounts receivable were uncollectible. Cash collected from accounts receivable has not been deposited in the cash at bank account of the partnership The partnership paid dissolution expenses of $2,000. Equipment Goodwill 480.000 340,000 1,720,000 4. Current assets Inventory Accounts receivable Cash at bank Required: 300,000 122,000 580,000 1,002,000 a. Prepare the realization account. 20 marks b. Prepare the capital accounts 25 marks Total assets 2,722,000 c. Prepare the cash at bank account. 10 marks d. 15 marks Current liabilities Accounts payable Loan from Chan "When bonds price is computed using discounted present value method, future cash flow of the bonds should be discounted using coupon interest rate". Explain whether you agree or disagree with this statement 282,000 30,000 312,000 Capital accounts Lee Kong Chan 1,230,000 260,000 920,000 2,410,000 Equity and liabilities 2,722,000