Charles, Diana, William are partners in a family business, CDW Partners. Their abridged statement of financial position as at 30 June 20x3 was: ASSETS EQUITY & LIABILITIES Land & Buildings 25 000 Capital: Charles 10 000 Vehicles 15 000 Diana 20 000 Accumulated depreciation: Vehicles (4 000) William 10 000 Accounts receivable 8 000 Current accounts: Charles 2 000 Allowance for bad debts (900) Diana 3 000 Inventories 11 900 William 2 000 Accounts payable 8 000 55 000 55 000 Their partnership agreement states that Charles, Diana and William will share profits and losses in the ratio 2:2:1, and that goodwill will not be reflected as an asset. On 30 June 20X3, Diana decided to withdraw from the partnership to start her own manufacturing business, and it was agreed that: These assets would be revalued as follows: Land and buildings N$ 40 000 Accounts receivable N$ 7 000 The partners cancelled a life policy with a surrender value of N$ 5 000. The proceeds were paid to Diana. As the partnership didn’t have sufficient cash to pay Diana for her remaining share of the partnership, it was agreed that a loan account be created and she would be repaid in monthly instalments over the next 14 months, starting on 01 July 20X3. Charles and William agreed to share profits and losses equally in their partnership. You are required to: QUESTION; 1. Prepare the journal entries to record Diana’s withdrawal from the partnership and Calculate the balance on the capital account of William after the withdrawal of Diana?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Charles, Diana, William are partners in a family business, CDW Partners. Their abridged statement of financial position as at 30 June 20x3 was:

ASSETS		EQUITY & LIABILITIES
Land & Buildings	25 000	Capital: Charles	10 000
Vehicles	15 000	Diana	20 000
Accumulated depreciation: Vehicles	(4 000)	William	10 000
Accounts receivable	8 000	Current accounts: Charles	2 000
Allowance for bad debts	(900)	Diana	3 000
Inventories	11 900	William	2 000
		Accounts payable	8 000
	55 000		55 000

Their partnership agreement states that Charles, Diana and William will share profits and losses in the ratio 2:2:1, and that goodwill will not be reflected as an asset.

On 30 June 20X3, Diana decided to withdraw from the partnership to start her own manufacturing business, and it was agreed that:
- These assets would be revalued as follows:
  - Land and buildings N$ 40 000
  - Accounts receivable N$ 7 000
- The partners cancelled a life policy with a surrender value of N$ 5 000. The proceeds were paid to Diana.
- As the partnership didn’t have sufficient cash to pay Diana for her remaining share of the partnership, it was agreed that a loan account be created and she would be repaid in monthly instalments over the next 14 months, starting on 01 July 20X3.
- Charles and William agreed to share profits and losses equally in their partnership.

You are required to:

QUESTION;

1. Prepare the journal entries to record Diana’s withdrawal from the partnership and Calculate the balance on the capital account of William after the withdrawal of Diana?

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