QUESTION 2 (28 Marks: 50 Minutes) Ignore VAT The Coffee Shop is a partnership owned by two partners, Kotefi and Bean. They share profits or losses in equal ratio. On 1 March 2020 Kotefi retired and Cappucino was admitted as a partner to the business. The Statement of Financial Position as at 29 February 2020 is presented to you: Coffee Shop Statement of Financial Position As at 29 February 2020 R ASSETS Non-current assets Equipment at cost Accumulated depreciation - equipment Motor vehicle at cost Accumulated depreciation - motor vehicle 310 000 (93 000) 175 500 (58 500) Current assets Inventory Cash and cash equivalents 264 000 272 000 870 000 EQUITY AND LIABILITIES Equity Capital accounts Kotefi 220 000 Bean 248 000 468 000 36 000 Current liabilities Trade Payables Current Accounts Kotefi Bean (36 400) 402 400 366 000 870 000 The following terms and conditions were agreed upon the introduction of Cappucino: The tangible assets of Kotefi and Bean are to be valued as follows: Motor vehicle - at carrying amount Equipment - R255 000 Inventory - R245 000 Goodwill of R72 000, for the retirement of Kotefi was agreed upon by the partners. Goodwill will not be reflected as an asset in the books of the new partnership. 40% of the amount due to Kotefi was settled by means of an Electronic funds transfer (EFT) payment. The balance was to be recorded as a long term loan to Kotefi. The new partnership is to continue using the same set of books as previously used by Kotefi and Bean. Cappucino will be contributing R96 000 cash and a cappuccino machine to the value of R 58 340 as his capital contribution. Accounting 102/16 - October 2020 Page 4 of 6 QUESTION 2 (CONTINUED) Bean and Cappucino will share profits in the ratio 2:1 respectively and will continue business in the name of The Coffee Shop. REQUIRED: 1. Prepare the general journal entries to account for the retirement of Kotefi and the admission of Cappucino to the partnership on 1 March 2020. (20 Marks) 2. Prepare the partners' capital accounts (in columnar format) for The Coffee Shop as at 1 March 2020. Show workings. (7 Marks) Presentation - Layout and format (1 Marks)