Question 1

Barney and Wally were partners, trading as B & W Traders. They shared profits and loses in the ratio 3:2. On 1 July 2007 the decided to amalgamate with Mac. On 30 June 2007 the balance sheets of the respective firms were as follows:

The terms of amalgamation were as follows:

1. The assets were revalued as follows:

2. Goodwill was not to appear as an asset in the books of the new partnership.

3. It was agreed that all Mac's assets and liabilities would be taken over, with the exception of motor vehicles, which were to be taken over and paid for in cash by Mac.

4. The profit-sharing ratio in the new partnership would be:

Barney 4 : Wally 3 : Mac 2

5. Capital balances were to be in profit-sharing ration and based on Wally's balance after all adjustments had been made. Cash had to be paid in or withdrawn by Barney and Mac to that effect.

6. The name of the new firm was to remain B & W Traders.

Required

(a) Journalise all entries required to adjust and close Mac's books. Narrations are not required.

(b) Journalise all entries in connection with the amalgamation in the books of B & W Traders. Narrations are not required.

(c) Show the balance sheet of the new firm on 1 July 2007, after the amalgamation.

Mac Barney & Wally R R Assets BALANCE SHEET AT 30 JUNE 2007 Barney & Mac Wally R Owners' equity and liabilities 100 000 Capital: 20 000 10 000 - Barney 30 000 15 000 - Wally 45 000 20 000 - Mac 40 000 12 000 Creditors 9 700 1 000 244 700 58 000 Buildings Vehicles Goodwill Trading stock Debtors Cash at bank 127 200 84 700 50 000 8 000 32 800 244 700 58 000 1. Mac The assets were revalued as follows: Barney & Wally R Buildings 120 000 Trading stock 42 000 Goodwill 45 000 18 000 18 000 Mac Barney & Wally R R Assets BALANCE SHEET AT 30 JUNE 2007 Barney & Mac Wally R Owners' equity and liabilities 100 000 Capital: 20 000 10 000 - Barney 30 000 15 000 - Wally 45 000 20 000 - Mac 40 000 12 000 Creditors 9 700 1 000 244 700 58 000 Buildings Vehicles Goodwill Trading stock Debtors Cash at bank 127 200 84 700 50 000 8 000 32 800 244 700 58 000 1. Mac The assets were revalued as follows: Barney & Wally R Buildings 120 000 Trading stock 42 000 Goodwill 45 000 18 000 18 000