QUESTION 7 (25 Marks) Eden and Stein were in partnership, sharing profits and losses in the ratio 2:1. Their abridged statement of financial position as at 31 March 20x5 was: ASSETS EQUITY & LIABILITIES Equipment at carrying value 5,600 Capital: E Eden 1,400 S Stein 5,000 4,000 Vehicles at carrying value Inventory 3,500 Current accounts: E Eden 2,000 Accounts receivable 6,500 S Stein (1,000) Bank 1,500 3,000 Long-term borrowings Accounts payable 5,500 18.500 18.500 The partnership was sold to Diamond Ltd as a going concern. The company was incorporated with a registered capital of 20,000 ordinary shares of N$1 each. The partnership paid N$450 and Diamond Ltd N$1000 for expenses for the transfer. The agreement was as follows: 1. Eden would take over one vehicle at book value, that is, N$800, and Stein would take over the other vehicle at N$1,100. 2. Diamond Ltd would take over all assets and liabilities with the exception of bank and vehicles. 3. The assets were taken over at these valuation amounts: Goodwill N$4,800 Equipment N$5,000 Inventory at carrying value N$3,500 Accounts receivable at carrying value less an allowance for bad debts at 10%. 4. Diamond Ltd upon taking transfer would immediately pay off the loan. 5. Diamond Ltd would pay N$1650 in cash and the rest in shares. The shares were divided between Eden and Stein in the profit-sharing ratio. 6. The available cash would be divided between Eden and Stein in the profit-sharing ratio. The shares would between Eden and Stein in order to clear the outstanding capital accounts to nil. YOU ARE REQUIRED TO: 1. Draw up the realization account to show the necessary entries pertaining to the sale of the partnership. (10 marks) 2. Draw up the capital accounts of the partners (in columnar form) in the general ledger. (15 marks)