- 14 Marks
FA – May 2017 – L1 – SB – Q4b – Partnership Accounts
Prepare the capital accounts, cash account, and loan account upon the retirement of a partner and the statement of financial position of the new partnership.
Question
Ade, Olu, and Kola are in partnership sharing profits in the ratio 3:2:1 respectively. On March 31, 2016, their statement of financial position showed:
| Particulars | Amount (₦’000) | Amount (₦’000) |
|---|---|---|
| Capital accounts: | ||
| Ade | 1,511 | |
| Olu | 826 | |
| Kola | 578 | |
| Current accounts: | ||
| Ade | 1,008 | |
| Olu | 551 | |
| Kola | 386 | |
| Non-current assets: | ||
| Plant | 1,361 | |
| Vehicle | 907 | |
| Inventory | 1,134 | |
| Current assets: | ||
| Receivables | 1,758 | |
| Cash | 550 | |
| Current liabilities: | 850 | |
| Total: | 5,710 | 5,710 |
On April 1, 2016, Ade retired and the following terms were agreed according to their partnership deed:
i. Goodwill was valued at ₦1,572,000 and was not to be retained in the books of the continuing partners. Olu and Kola agreed to continue sharing profits in the ratio 2:1 respectively and to maintain their current accounts.
ii. Ade should take a car with carrying amount of ₦456,000 at a valuation of ₦324,000.
iii. Ade should receive a cash payment of ₦405,000 and retain the balance in a loan account bearing interest at 12% per annum.
Required:
i. Prepare the capital accounts, cash account, and loan account in the books of the old partnership. (6 Marks)
ii. Prepare the statement of financial position of the new partnership as at April 1, 2016, after giving effect to the retirement of Ade. (8 Marks)
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