QUESTION TWO Samuel and Mary are trading as partners sharing profits and losses in the ratio of 2:1 respectively. On 1 May 2015, Ann was admitted as a partner. The statement of financial position as at 30 April 2015 was as follows Non-current assets 44.8 follo Capi G Sh. Ha 9,000,000 Cas Freehold promises 3,700,000 Acc Plant and equipment Fixtures and fittings Current assets laventory Trade receivables 1.700.000 Ace 14,400,000 Dr. 6,200,000 NO 4,300,000 69.800 10.569.800 Cash balance 24.962.800 He No Financed by: Capital account: Samuel 3,000,000 Int Mary 4.000.000 12,000,000 Tr ot account Samuel 3,154,800 T- Mary 915.000 4,069,500 current liability Term loan Trade payables Bank overdraft 600,000 Current liabilities 2,700,000 $.600.000 8.300.000 24.969.800 2. 3. 4. 5. The admission of Ann was subject to the following: Samuel, Mary and Ann to share profits and losses in the ratio 2:1:1 respectively.. Ann is to contribute cash in order to bring her capital and current accounts to the same level as the initial partner from the old firm who has lower investment in the business. In addition, the partner in the old firm with the higher investment will draw out cash so that his/her capital and current accounts equal those of the new partners. On admission of Ana, goodwill was to be valued at Sh.600,000 but was not to be maintained in the books of the new firm An allowance for doubtful debts is to be made for Sh.300,000. On admission of Ann, the assets were to be revalued as follows: Asset Freehold premises Plant and equipment Sh. 11,000,000 3,400,000 Inventory 5,400,000 Required: (a) 00 Revaluation account (ii) Partners' capital accounts. (iii) Partners current accounts. (iv) Bank account (b) Statement of financial position as at 1 May 2015 after the admission of Ann (4 marks) (4 marks) (2 marks) (2 marks) (8 marks) (Total: 20 marks)