Anonymous
timer Asked: May 3rd, 2020

Question Description

Question 1 (30 Marks)

Leonard and Robert have been trading as partners for some time sharing profits and losses in the ratio 2:1.On 29 February 2020 their statement of financial position was as follows:

ASSETS

Non-current assets:

N$

Property

100 000

Vehicles

20 000

Furniture

10 000

Goodwill

30 000

Current assets:

Inventory

48 000

Accounts receivables

62 000

Bank

19 000

Total assets

289 000

EQUITY AND LIABILITIES:

Equity:

Capital accounts

Leonard

150 000

Robert

75 000

Current accounts

Leonard

6 000

Robert

4 000

Non-current liabilities:

Loan

40 000

Current liabilities:

Accounts payables

14 000

Total equity and liabilities

289 000

On 1 March 2020, they decided to admit Laurinda to the partnership on the following conditions:


  • The assets have be revalued as follows:
  • An allowance for credit losses of N$ 3 000 was to be created
  • Laurinda will obtain 1/5 share of the partnership and it was agreed that she would pay a premium for goodwill for her share.
  • Leonard and Robert will share the remaining profits in the ratio 3:2. Leonard and Robert must make cash payments or withdrawals in order to get their balances in line with their profit sharing ratios.
  • Goodwill should not be disclosed in the statement of financial position after the admittance of Laurinda.

N$

Furniture

8 500

Goodwill

45 000

Inventory

45 000

Vehicles

17 000

Property

130 000


REQUIRED:

MARKS

a)

Calculate the capital amount that Laurinda must contribute for 1/5 share in the partnership.

4

b)

Calculate the new profit sharing ratio of the partners after the admission of Laurinda.

4

c)

Prepare the capital accounts of the partners in columnar format.

14

d)

Draft the statement of financial position immediately after the admission of Laurinda to the partnership.

8

TOTAL MARKS

30

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