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
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question
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                
                 
Expert Solution
steps

Step by step

Solved in 5 steps

Blurred answer
Knowledge Booster
Partnership Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education