Question 1 Cempaka and Chandra are partners of a business selling cold-press juice. They share profits in the ratio of 3:2, charges interest on capital at 5 per cent per annum, interest on drawings at 4 per cent per annum and annual salary of RM14,100 is paid to Chandra. On 1 December 2017 the partners have agreed to admit Chelsea, of which profits and losses are then to be shared in the ratio of 2 2:1. Interest on capital will be 6 per cent per annum and annual salary of RM12,000 is to be paid to Chelsea. Interest on drawings remains unchanged. The financial year end of the business is on 31 December 2017. Below is the Statement of Financial Position before the appropriation of the profit for the year between the partners: Cempaka, Chandra and Chelsea Statement of Financial Position as at 31 December 2017 RM RM ASSETS Non-current assets Equipment 57650 Motor vehicle 35.270 92920 Current assets Inventories 1.280 Trade receivables 1815 Cash at bank 58.945 62.020 Total assets 154.940 EQUITY AND LIABILITIES Owners' equity Cempaka Chandra Chelsea Total Capital account 42,000 25.000 20.000 87,000 Current account 15,547 12.863 28,410 Drawings (5.100) (3.500) (8.600) 52,447 34.363 20.000 106,810 Net profit for the year 46.788 Total owners' equity 153,598 Current ability payables Total equity and liabilities 154,940 Following Chelsea's admission, the partners revalued their assets. Equipment is revalued at RM59,490 while inventories are revalued at RM790. The partners have also obtained the goodwill of the business being RM2,750. Profit or losses on the revaluation and goodwill are to be shared according to the partners' profit sharing ratio. Required: Prepare the following: (a) The partners' capital accounts, showing the profit or loss on the event or to the the goodwill of 1 342 Following Chelsea's admission, the partners revalued their assets. Equipment is revalued at RM59,490 while inventories are revalued at RM790. The partners have also obtained the goodwill of the business being RM2,750. Profit or losses on the revaluation and goodwill are to be shared according to the partners' profit sharing ratio. Required: Prepare the following: (a) The partners' capital accounts, showing the profit or loss on the revaluation of assets and the goodwill of the partners. (8 marks) (b) The appropriation account deriving to the sharing of residual profits of the partners. Drawings by the partners were done in 30 Nov 2017. Following this, update the partners' current accounts and prepare staement of financial position. (21 marks) (c) Cempaka decides to leave the partnership on 1 January 2018 after Chelsea has familiarised herself to the business. Provide the appropriate journal entry to effect this transaction. (1 marks)
