QUESTION SIX
The following
Capital accounts: K K
Gum 10,000
Mum 5,000
Cash at bank 1,550
Accounts payable 500
Current accounts:
Gum 1,000
Mum 2,000
Motor vehicles 1,000
Fixtures and fittings 2,000
Land and Buildings 30,000
Motor vehicles 4,500
Net profit (for the year to 31 March 2021 26,250
Inventory at cost 3,000
K45,050 K45,050
In appropriating the net profit for the year, it has been agreed that Mum should be entitled to a salary of K9,750. Each partner is also entitled to interest on his opening capital account balance at the rate of 10 per cent per annum.
Gum and Mum have decided to convert the partnership into a limited company, Plain Limited, as from 1 April 2021.. The company is to take over all the assets of the partnership, except that Gum is to retain for personal use one of the motor vehicles at an agreed transfer price of K1,000.
The purchase consideration will consist of 40,000 ordinary shares of K1 each in Plain Limited, to be divided between the partners in profit- sharing ratio. Any balance on the partners’ current accounts is to be settled in cash.
REQUIRED:
To prepare the main ledger accounts of the partnership in order to close off the books as at 31 March 2021.
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