Taneika, Tiana and Tina are in partnership for the business T3 Enterprise. They are sharing profits and losses in the ratio 3:2:1 respectively. The balance sheet for the partnership as at June 30, 2021 is as follows:

Tina decides to retire from the business on June 30, 2021, and Tamoy is admitted as a partner on that date. The following matters are agreed:

i. Certain assets were revalued: Premises $120, 000; Plant $35 000; Inventory $54 179 ii. Provision is to be made for doubtful debts in the sum of $3 000.

iii. Goodwill is to be recorded in the books on the day Tina retires in the sum of $42 000.

The partners in the new firm do not wish to maintain a goodwill account so that amount

is to be written back against the new partners capital accounts.

iv. Taneika and Tiana are to share profits in the same ratio as before and Tamoy is to have the same share of profits as Tiana.

v. Tina is to take her car at its book value of $3 900 in part payment and the balance of all

she is owed by the firm in cash, except $20 000 which she is willing to leave as a loan account.

vi. The partners in the new firm are to start on an equal footing so far as capital and current accounts are concerned. Tamoy is to contribute cash to bring her capital and current accounts to the same amount as the original partner from the old firm who has the lower investment in the business.

The original partner in the old firm who has the higher investment will draw out cash so that her capital and current account balances equal those of her new partners.

Required:

A. Prepare the following accounts for the partnership:

a. Revaluation Account

b. Goodwill Account

c. Capital Account

d. Current Account

e. Retirement Account

f. Bank Account

B. Explain TWO (2) reasons for a change in the constitution of a partnership. 4 marks

$ $ Non-Current Asset Premises Plant Vehicles Fixtures Total Non Current Assets S 90 000 37 000 15 000 2 000 144 000 Current Assets Inventory Receivables Cash Total Current Assets 62 379 34 980 760 98 119 Less: Current liabilities Payables Bank overdraft Total Current Liabilities Net Current Assets 19 036 4 200 (23 236 74 883 218 883 Less: Non-current Liabilities Loan - Tina (28 000) 190 883 Capital Taneika Tiana Tina 85 000 65 000 35 000 185 000 Current Account Taneika Tiana Tina 3 714 (2 509) 4678 5 883 190 883 $ $ Non-Current Asset Premises Plant Vehicles Fixtures Total Non Current Assets S 90 000 37 000 15 000 2 000 144 000 Current Assets Inventory Receivables Cash Total Current Assets 62 379 34 980 760 98 119 Less: Current liabilities Payables Bank overdraft Total Current Liabilities Net Current Assets 19 036 4 200 (23 236 74 883 218 883 Less: Non-current Liabilities Loan - Tina (28 000) 190 883 Capital Taneika Tiana Tina 85 000 65 000 35 000 185 000 Current Account Taneika Tiana Tina 3 714 (2 509) 4678 5 883 190 883