Question 4 Sofia, Tini and Umi are partners of trading business which focus on selling children's books. The partnership agreement contains the following provisions: i. ii. Interest at 15% per annum is to be allowed on the opening balances of capital account. The partners will be charged interest on any cash drawings made during the year at a rate of 8% per annum Any profits or losses are to be shared by Sofia, Tini and Umi in the ratio of 3:2:1 respectively Tini is entitiled to receive annual salary of RM8,400 for running the business. iv. As 30 June 2018, the partners' capital and current account balances were as follows: Sofia Tini Umi Capital Account RM 195,000 155,000 115,000 Current Account RM (35,000) 46.000 24,000 On 30 April 2019, Sofia retired from the partnership due to disagreement between the partners. It was agreed that RM70,000 will be paid immediately and the remaining is to be paid in 2 installments due on 30 September 2019 and 31 December 2019 with no interest charge. On 1 May 2019, the remaining partners agreed to admit Aisya into the partnership. Aisya would contribute cash of RM95,000 as capital and RM14,400 as premium on goodwill. The new partnership agreement provides the following details i. ii. Profit and losses are to be shared equally, No interest on drawing will be charged and no salary paid to partners. Interest on capital will be allowed at 10% per annum on opening capital balances. iii. Additional information: 1. The value of goodwill is RM43,200. Goodwill account is not to be maintained in the books 2. The following are balances of assets before revaluation: Office equipment Motor vehicles Inventories Freehold land and building RM 43,250 32,000 19,200 100,000 3. The value of freehold land and building is to be increased to RM175,000 as determined by a professional valuer who will be paid RM15,000 for his professional charges. 4. The values for office equipment and motor vehicles are to be decreased to RM25,250 and RM20,000 respectively. Meanwhile, inventories are increased by RM570. 5. Loan of RM35,000 cash was given by Umi to the partnership on 3 May 2019. Interest of 8% per annum is charged and to be adjusted at net profit. 6. Drawings made by partners during the year were as follows: Sofia Tini Umi RM 8,000 (31/12/2018) 5,000 (05/02/2019) 3,300 (30/10/2018) 7. Net profit for the year ended 30 June 2019 amounted to RM88,014. Assume the profit is accrued evenly throughout the year. Required: a. Prepare goodwill account (3mark) b. Prepare; i Revaluation account 1. The Appropriation account incorporating the pre and post period for the year ended 30 June 2019. Partner's Capital and Current accounts. C. One of the disadvantages of a partnership is that the partnership has to be reformed whenever there are changes in partnership. The partnership may be changed by several reasons. List three (3) reasons that lead to changes in partnership