Question 2

John, Tom and Harry are in partnership sharing profits and losses in the ratio 4:3:3 respectively. On January 1, 2015 they decided to dissolve the partnership. The Balance Sheet on December 31, 2014 was as follows:

Details/Accts

$

$

Details/Accts

$

$

Capital Accounts:

Fixed Assets (NBV)

John

4,000,000

Furniture etc.

3,400,000

Tom

3,000,000

Motor vehicles

2,500,000

Harry

2,000,000

9,000,000

5,900,000

Current Accounts:

Current Assets

John

1,000,000

Stock

2,000,000

Tom

700,000

Debtors

4,100,000

Harry

500,000

2,200,000

Investments

1,400,000

Loan

2,800,000

Cash and bank

2,100,000

9,600,000

Creditors

1,500,000

-------------

15,500,000

15,500,000

Notes:

(i)The furniture, etc. were sold for $3,550,000 and John took control of a motor car which was valued at $700,000 in the books. It was decided to let John have the car for $750,000. The rest of the vehicles were sold for $2,600,000. Repairs cost paid for the vehicles amounted to $80,000.

(ii)Accounts receivable realised $3,920,000 while accounts payable were settled for $1,300,000. The investments were settled for $1,320,000.

(iii)The loan along with the interest applicable was repaid completely as at December 31, 2014. Expenses incurred in dissolving the business amounted to $100,000

(iv)The stocks were sold for 2,200,000.

Required:

(a)The partners' capital accounts on dissolution. (7 marks)

(b)The Realisation Account on dissolution. (10 marks)

(c)The cash/bank account. (8 marks)