Adam and Boru are partners sharing profit and loss in the ratio of 1:1. Their Statement of Financial Position(Balance Sheet) stood as at 31.12.2020 as follows: A and B Partnership Statement of Financial Position As at 31st December 2020 ASSETS 2020 Current Assets Kshs'000 Kshs'000 Cash and Cash Equivalent 43,500 Short Term Deposits - Prepaid Insurance 1,000 Debtors 20,500 Less Provision for Doubtful Debts (1,000) 19,500 Inventories 30,000 94,000 Non Current Assets Machinery 22,000 Less:Accumulated Depreciation - 22,000 Buildings 30,000 Less:Accumulated Depreciation - 30,000 Furniture 21,000 Less:Accumulated Depreciation - 21,000 Goodwill 40,000 113,000 Total Assets 207,000 LIABILITIES Current Liabilities Outstanding Salary 5,000 Creditors 90,000 95,000 Non Current Liabilities - - - - - - - Total Liabilities 95,000 NET ASSETS 112,000 SHAREHOLDERS' FUNDS Capital Account: Partner Adam 40,000 Capital Account: Partner Boru 40,000 General Reserves 12,000 Profit & Loss A/c 20,000 112,000 - Additional Information i). Chalo is admitted as a new partner introducing a capital of Kshs.25,000 for his 1/4th share in future profits. The following revaluation are made: ii). Inventory depreciated by 5% iii. Furniture depreciated by 10% iv. Buildings be revalued at Kshs.40,000 v. The provision for doubtful debts should be increased to Kshs.2,000 vi. Goodwill was valued at Kshs.58,000 vii. Creditors include Kshs.5,000 no longer payable and this amount was to be written off viii. Investment of Kshs.10,000 be brought into the books Required (a) Prepare Journal Entries for these adjusting transactions (b) Prepare the Revaluation Account (c) Prepare the Partners' Capital Accounts (d) Prepare the Statement of Financial Position after the admission of the new Partner,Chalo (e) Compute the New Profit Sharing Ratio and the Sacrificing Ratio Required: (a) Income Statement and Appropriation account for the year ended 31st March 2017 (b) Partners' Current Accounts as at 31st March 2017 (c) Statement of Financial Position as at 31st March 2017

Adam and Boru are partners sharing profit and loss in the ratio of 1:1. Their Statement of Financial Position(Balance Sheet) stood as at 31.12.2020 as follows: A and B Partnership Statement of Financial Position As at 31st December 2020 ASSETS 2020 Current Assets Kshs'000 Kshs'000 Cash and Cash Equivalent 43,500 Short Term Deposits - Prepaid Insurance 1,000 Debtors 20,500 Less Provision for Doubtful Debts (1,000) 19,500 Inventories 30,000 94,000 Non Current Assets Machinery 22,000 Less:Accumulated Depreciation - 22,000 Buildings 30,000 Less:Accumulated Depreciation - 30,000 Furniture 21,000 Less:Accumulated Depreciation - 21,000 Goodwill 40,000 113,000 Total Assets 207,000 LIABILITIES Current Liabilities Outstanding Salary 5,000 Creditors 90,000 95,000 Non Current Liabilities - - - - - - - Total Liabilities 95,000 NET ASSETS 112,000 SHAREHOLDERS' FUNDS Capital Account: Partner Adam 40,000 Capital Account: Partner Boru 40,000 General Reserves 12,000 Profit & Loss A/c 20,000 112,000 - Additional Information i). Chalo is admitted as a new partner introducing a capital of Kshs.25,000 for his 1/4th share in future profits. The following revaluation are made: ii). Inventory depreciated by 5% iii. Furniture depreciated by 10% iv. Buildings be revalued at Kshs.40,000 v. The provision for doubtful debts should be increased to Kshs.2,000 vi. Goodwill was valued at Kshs.58,000 vii. Creditors include Kshs.5,000 no longer payable and this amount was to be written off viii. Investment of Kshs.10,000 be brought into the books Required (a) Prepare Journal Entries for these adjusting transactions (b) Prepare the Revaluation Account (c) Prepare the Partners' Capital Accounts (d) Prepare the Statement of Financial Position after the admission of the new Partner,Chalo (e) Compute the New Profit Sharing Ratio and the Sacrificing Ratio Required: (a) Income Statement and Appropriation account for the year ended 31st March 2017 (b) Partners' Current Accounts as at 31st March 2017 (c) Statement of Financial Position as at 31st March 2017

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 4PB

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Adam and Boru are partners sharing profit and loss in the ratio of 1:1.
Their Statement of Financial Position(Balance Sheet) stood as at 31.12.2020 as follows:

		A and B Partnership
		Statement of Financial Position
		As at 31st December 2020

ASSETS				2020
Current Assets			Kshs'000	Kshs'000
Cash and Cash Equivalent				43,500
Short Term Deposits				-
Prepaid Insurance				1,000
Debtors			20,500
Less Provision for Doubtful Debts			(1,000)	19,500
Inventories				30,000
				94,000
Non Current Assets
Machinery			22,000
Less:Accumulated Depreciation			-	22,000

Buildings			30,000
Less:Accumulated Depreciation			-	30,000

Furniture			21,000
Less:Accumulated Depreciation			-	21,000
Goodwill				40,000
				113,000
Total Assets				207,000

LIABILITIES
Current Liabilities
Outstanding Salary				5,000
Creditors				90,000
				95,000

Non Current Liabilities
	-			-
	-			-
	-			-
				-
Total Liabilities				95,000
NET ASSETS				112,000

SHAREHOLDERS' FUNDS
Capital Account: Partner Adam				40,000
Capital Account: Partner Boru				40,000
General Reserves				12,000
Profit & Loss A/c				20,000

				112,000
				-
Additional Information
i). Chalo is admitted as a new partner introducing a capital of Kshs.25,000 for his 1/4th share in future profits.
The following revaluation are made:
ii). Inventory depreciated by 5%
iii. Furniture depreciated by 10%
iv. Buildings be revalued at Kshs.40,000
v. The provision for doubtful debts should be increased to Kshs.2,000
vi. Goodwill was valued at Kshs.58,000
vii. Creditors include Kshs.5,000 no longer payable and this amount was to be written off
viii. Investment of Kshs.10,000 be brought into the books

Required
(a) Prepare Journal Entries for these adjusting transactions
(b) Prepare the Revaluation Account
(c) Prepare the Partners' Capital Accounts
(d) Prepare the Statement of Financial Position after the admission of the new Partner,Chalo
(e) Compute the New Profit Sharing Ratio and the Sacrificing Ratio
Required:
(a) Income Statement and Appropriation account for the year ended 31st March 2017
(b) Partners' Current Accounts as at 31st March 2017
(c) Statement of Financial Position as at 31st March 2017

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