QUESTION ONE PARTNERSHIP

Kimberly and Amanda are in partnership, sharing profits and losses in the ratio of $2$:$1.$ On July $1,$

$2014$ they agree to change the profit$-$sharing ratio so that they will share profits and losses equally

in the future. The partnership Balance sheet at $31$ December, $2013$ was as follows.

Fixed asset at net book value

Freehold Premises

$60,000$

$35,000$

$23,000$

$118,000$

Plant and Machinery

Motor vehicles

Current assets

Inventory

$29,000$

Accounts Receivable

$13,000$

Bank

$8,000$

$50,000$

K

$18,000$

Current liabilities

Accounts Payable

$7,000$

$43,{000}_{?}$

Capital

Kimberly

$90,000$

Amanda

$71,000$

$161,{000}_{?}$

The partners agree that the assets shall be revalued at $30$ June $2014$ as follows.

Freehold Premises

K $100,000$

Plant and machinery

K $30,000$

Motor Vehicles

K $20,000$

Inventory

K $25000$

Accounts Receivable

K $12,000$

Required

$($a$)$ Prepare Journal entries to give effect to the revaluation of the assets in the partnership

books.

$($b$)$ Prepare a redrafted Balance Sheet as at $30$ June $2014$ after the assets have been revalued.

$(11$ Marks$)$