QUESTION 1 Sand and Stone are in partnership business sharing profit and losses in accordance with the capital account proportions. They operate under the business name Sand &Stone Enterprise. In July 2018, they decided to amalgamate their firm with that of another partnership Hot and Cold operating under the business name Hot & Cold Enterprise. Hot and cold share profits and lots equally. At the close of business on 30 June, 2018, the separate statement of financial positions of the two firms were as follows: Sand & Stone Enterprise Hot & Cold Enterprise Non-current Assets GH GH GH Freehold Land and Building 700,000 1,000,000 Plant and Machinery 950,000 Motor Vehicles 150,000 200,000 Fumiture and Fixtures 460,000 1,310,000 2,150,000 GH Current Assets Inventory Trade Receivables Cash and Bank 550,000 270,000 210,000 1,090,000 640,000 1,030,000 2,340,000 1,730,000 3,880,000 Current Liabilities Trade Payables Electricity bill accrued Bank overdraft Net Assets Employed 310,000 570,000 220,000 490,000 1,280,000 2,600,000 2,030,000 1,200,000 600,000 Finance by: Capital Accounts Sand Stone Hot Cold Current Accounts Sand Stone Hot Cold 1,000,000 1,000,000 100,000 130,000 400,000 200,000 2,600,000 2,030,000 Additional information: 0 it) Under the terms of the agreement, the new firm took over all the assets of Sand &Stone Enterprise except for cash and bank. This balance was retained by the partners in order to discharge some of the Trade payables. Stone paid the remaining trade payables from his personal resources. Other assets were taken over at the following revalued amounts: Freehold Land and Building GH1,200,000; Motor Vehicles GH490,000; Furniture and Fixtures GH400,000; Inventories GH500,000; and Trade Receivables GH270,000. The new firm also took over all the assets of Hot & Cold Enterprise and also assumed responsibility for discharging all the liabilities. The assets were revalued as follows: Freehold Land and Building GH2,000,000; Plant GH800,000; Motor Vehicles GH200,000; Inventories GH810,000; and Trade Receivables GH610,000. For the purpose of the amalgamation, the value of goodwill of the two firms were agreed to be valued at 2 years' purchase of the simple average annual profits of the last three accounting years to the year of amalgamation. The profits of the firms for the three years ending 30th June, 2018 are as follows: Sand & Stone Enterprise Hot & Cold Enterprise Year GH GH 2016 180,000 287,000 2017 152,000 252,000 2018 100,000 160,000 1) It was further agreed that the initial capital of the new firm was to be GH8,000,000 to be contributed equally by the four partners. Sand, Stone, Hot and cold are to be equal partners is the new firm. The new firm is to recognize all assets and liabilities as revalued for th amalgamation process. Required: a) Calculate the purchase consideration on amalgamation for both firms; b) Prepare the Realisation Account; c) Partners' Capital Account; d) Bank Account; and e) Statement of Financial Position of the new firm as at 15 July 2018. (20 ma QUESTION 1 Sand and Stone are in partnership business sharing profit and losses in accordance with the capital account proportions. They operate under the business name Sand &Stone Enterprise. In July 2018, they decided to amalgamate their firm with that of another partnership Hot and Cold operating under the business name Hot & Cold Enterprise. Hot and cold share profits and lots equally. At the close of business on 30 June, 2018, the separate statement of financial positions of the two firms were as follows: Sand & Stone Enterprise Hot & Cold Enterprise Non-current Assets GH GH GH Freehold Land and Building 700,000 1,000,000 Plant and Machinery 950,000 Motor Vehicles 150,000 200,000 Fumiture and Fixtures 460,000 1,310,000 2,150,000 GH Current Assets Inventory Trade Receivables Cash and Bank 550,000 270,000 210,000 1,090,000 640,000 1,030,000 2,340,000 1,730,000 3,880,000 Current Liabilities Trade Payables Electricity bill accrued Bank overdraft Net Assets Employed 310,000 570,000 220,000 490,000 1,280,000 2,600,000 2,030,000 1,200,000 600,000 Finance by: Capital Accounts Sand Stone Hot Cold Current Accounts Sand Stone Hot Cold 1,000,000 1,000,000 100,000 130,000 400,000 200,000 2,600,000 2,030,000 Additional information: 0 it) Under the terms of the agreement, the new firm took over all the assets of Sand &Stone Enterprise except for cash and bank. This balance was retained by the partners in order to discharge some of the Trade payables. Stone paid the remaining trade payables from his personal resources. Other assets were taken over at the following revalued amounts: Freehold Land and Building GH1,200,000; Motor Vehicles GH490,000; Furniture and Fixtures GH400,000; Inventories GH500,000; and Trade Receivables GH270,000. The new firm also took over all the assets of Hot & Cold Enterprise and also assumed responsibility for discharging all the liabilities. The assets were revalued as follows: Freehold Land and Building GH2,000,000; Plant GH800,000; Motor Vehicles GH200,000; Inventories GH810,000; and Trade Receivables GH610,000. For the purpose of the amalgamation, the value of goodwill of the two firms were agreed to be valued at 2 years' purchase of the simple average annual profits of the last three accounting years to the year of amalgamation. The profits of the firms for the three years ending 30th June, 2018 are as follows: Sand & Stone Enterprise Hot & Cold Enterprise Year GH GH 2016 180,000 287,000 2017 152,000 252,000 2018 100,000 160,000 1) It was further agreed that the initial capital of the new firm was to be GH8,000,000 to be contributed equally by the four partners. Sand, Stone, Hot and cold are to be equal partners is the new firm. The new firm is to recognize all assets and liabilities as revalued for th amalgamation process. Required: a) Calculate the purchase consideration on amalgamation for both firms; b) Prepare the Realisation Account; c) Partners' Capital Account; d) Bank Account; and e) Statement of Financial Position of the new firm as at 15 July 2018. (20 ma