R Anele and Babalo were in partnership sharing profits and losses in the ratio 3 : 2 respectively. On 1 January 2020 the two partners agreed to combine their business with that of Crail, their main competitor, and form a new partnership. The following are the post-closing trial balances of the two businesses at 1 January 2020 ANELE AND BABALO'S LEDGER BALANCES CRAIL'S LEDGER BALANCES DR CR DR CR R R R Capital: Anele 114 000 Capital: Crail 137 250 Babalo 84 000 Accounts payable 65 700 Current accounts: Anele 8 000 Machinery, at cost 78 000 Babalo 16 000 Accumulated depreciation: Long term loan 90 000 Machinery 6 000 Accounts payable 55 000 Allowance for credit losses 3 600 Machinery, at cost 148 500 Inventory 78 750 Accumulated depreciation: Accounts receivable 30 600 Machinery 54 000 Bank 25 200 Allowance for credit losses 9 000 R212 550 R212 550 Inventory 154 500 Accounts receivable 90 000 Bank 21 000 R422 000 R422 000 On 1 January Anele, Babalo and Crail agreed on the following terms and condition: 1. The new partnership will not establish a new set of accounting records, but will continue to use Anele and Babalo's accounting records 2. The new partnership will take over the assets and liabilities above at existing carrying amounts with the exception of the following: Anele and Babalo's machinery is to be valued at R120 000 and Crail's at R75 000. R8 000 is to be written off Anele and Babalo's accounts receivable and their allowance for credit losses is to be increased to R15 000 Anele and Babalo's goodwill is worth R153 000 Crail's goodwill is worth R65 000 R2 700 is to be written off Crail's inventory Anele and Babalo will settle the long term loan (in the profit-sharing ratio that existed between them) from their personal cash resources. 3. Goodwill is not to be recorded as an asset in the ledger of the new partnership 4. The profit-sharing ratio between Anele. Babalo and Crail will be 7:7:6. REQUIRED (a) Make entries in general journal form, without narrations, to record: The revaluation of Anele and Babalo's assets according to the agreement above. Crails investment in the new partnership (12%) (b) Cici and Didi have been trading together in a very successful Restaurant and bar business for a number of years and now wish to sell the business. Briefly explain what factors Cici and Didi must take into consideration when deciding on a purchase price for their Restaurant and bar business (3) (c) Briefly explain the implications of tax on a Partnership form of business as well as to the partners as the owners of the business (1%) NOTE: Show all workings clearly. Work to nearest R1. R Anele and Babalo were in partnership sharing profits and losses in the ratio 3 : 2 respectively. On 1 January 2020 the two partners agreed to combine their business with that of Crail, their main competitor, and form a new partnership. The following are the post-closing trial balances of the two businesses at 1 January 2020 ANELE AND BABALO'S LEDGER BALANCES CRAIL'S LEDGER BALANCES DR CR DR CR R R R Capital: Anele 114 000 Capital: Crail 137 250 Babalo 84 000 Accounts payable 65 700 Current accounts: Anele 8 000 Machinery, at cost 78 000 Babalo 16 000 Accumulated depreciation: Long term loan 90 000 Machinery 6 000 Accounts payable 55 000 Allowance for credit losses 3 600 Machinery, at cost 148 500 Inventory 78 750 Accumulated depreciation: Accounts receivable 30 600 Machinery 54 000 Bank 25 200 Allowance for credit losses 9 000 R212 550 R212 550 Inventory 154 500 Accounts receivable 90 000 Bank 21 000 R422 000 R422 000 On 1 January Anele, Babalo and Crail agreed on the following terms and condition: 1. The new partnership will not establish a new set of accounting records, but will continue to use Anele and Babalo's accounting records 2. The new partnership will take over the assets and liabilities above at existing carrying amounts with the exception of the following: Anele and Babalo's machinery is to be valued at R120 000 and Crail's at R75 000. R8 000 is to be written off Anele and Babalo's accounts receivable and their allowance for credit losses is to be increased to R15 000 Anele and Babalo's goodwill is worth R153 000 Crail's goodwill is worth R65 000 R2 700 is to be written off Crail's inventory Anele and Babalo will settle the long term loan (in the profit-sharing ratio that existed between them) from their personal cash resources. 3. Goodwill is not to be recorded as an asset in the ledger of the new partnership 4. The profit-sharing ratio between Anele. Babalo and Crail will be 7:7:6. REQUIRED (a) Make entries in general journal form, without narrations, to record: The revaluation of Anele and Babalo's assets according to the agreement above. Crails investment in the new partnership (12%) (b) Cici and Didi have been trading together in a very successful Restaurant and bar business for a number of years and now wish to sell the business. Briefly explain what factors Cici and Didi must take into consideration when deciding on a purchase price for their Restaurant and bar business (3) (c) Briefly explain the implications of tax on a Partnership form of business as well as to the partners as the owners of the business (1%) NOTE: Show all workings clearly. Work to nearest R1