Admission & Retirement

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ΛΥΚΕΙΟ ΑΚΡΟΠΟΛΗΣ

ΛΟΓΙΣΤΙΚΗ ΕΜΠΛΟΥΤΙΣΜΟΥ 2015-2016

PRACTICE QUESTIONS

PARNERSHIPS

ADMISSION & RETIREMENT

QUESTION 1

A, B and C have been in partnership for a number of years, sharing profits and losses in the ratio 3:2:1 respectively.

The summarised partnership balance sheet at 30 September 2014 is shown below:

Fixed assets / € / €
120,000
Bank / 2,000
Other Current assets / 56,000
58,000
Current liabilities / 48,000 / 10,000
130,000
Capital Accounts: A / 80,000
B / 40,000
C / 10,000
130,000

B retired from the partnership on 30 September 2014. A and C continued in partnership; they shared profits in the ratio 2:1 respectively. The three partners agreed that the following asset valuations applied at 30 September:

€

Fixed assets260,000

Goodwill150,000

Current assets (excluding bank)54,000

It was further agreed that goodwill would not be retained in the books. A and C were unsure how any debt owed to B should be settled. In the short-term, the amount was transferred to a loan account.

REQUIRED

(a) Prepare the Revaluation Account.(5 marks)

(b) Prepare the partners’ Capital Accounts at 30 September 2014, showing the effects of B’s retirement.

QUESTION 2

Yu and Zan are in partnership sharing profits and losses in the ratio 3:2 respectively. At 31 March 2015, their Balance Sheet was as follows:

Fixed assets
Goodwill / € / €
120,000
Premises / 180,000
Office equipment / 40,000
Fixtures and fittings / 30,000
370,000
Current assets
Stock / 26,000
Debtors / 34,000
Bank / 18,000
78,000
Creditors falling due within one year
Creditors / (30,000)
Net current assets / 48,000
418,000
Capital
Yu / 258,000
Zan / 160,000
418,000

The following additional information was available:

(1) Veata was admitted into the partnership on 1 April 2015. It was agreed that all profits and losses in the new partnership would be shared equally.

(2) Veata introduced into the partnership stock valued at €40,000, debtors of €16,000, and also sufficient cash to cover her share of goodwill.

(3) Assets and liabilities of the former partnership were revalued as follows:

New Value

€

Goodwill180,000

Premises260,000

Office equipment36,000

Creditors27,800

Stock25,200

(4) The partners decided that goodwill will not be recorded in the books of the new partnership.

Prepare the:

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(a) Revaluation Account of Yu and Zan

(7 marks)

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(b) Capital Accounts of Yu, Zan and Veata following both the revaluation of assets and liabilities and the admission of Veata

(7 marks)

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QUESTION 3

Amy and Bill are in partnership sharing profits and losses in the ratio 2:1. Their Balance Sheet is as follows:

Balance Sheet at 30 June 2015

Fixed assets / € / €
Premises / 50,000
Equipment / 15,250
Current assets / 65,250
Stock / 8,500
Debtors / 7,800
Bank / 550
Creditors falling due within one year / 16,850
Creditors
Net current assets / 7,150 / 9,700
74,950
Capital Accounts:Amy / 40,000
Bill
Current Accounts:Amy / 30,000
5,400 / 70,000
Bill / (450) / 4,950
74,950
Additional information:

(1) On 1 July, Charles was admitted into the partnership. Future profits and losses were to be shared by Amy, Bill and Charles in the ratio 2:1:1 respectively.

(2) Goodwill was valued at €9,000 at 30 June 2015. The partners agreed that goodwill would not be retained in the books of the partnership.

(3) Charles brought into the partnership vehicles at a valuation of €13,500, stock €1,500 and cash

€7,500. The cash was deposited in the business bank account.

(4) It was agreed that Charles would make an additional payment by cheque into the partnership bank account, to pay for his share of the goodwill.

(5) It was decided to revalue the premises at €110,000 at 30 June 2015.

REQUIRED

(a) Prepare the journal entries recording the admission of the new partner.

Narratives are not required.

(b) Prepare the Balance Sheet of the new partnership at 1 July 2015.

(d) Explain the rule of Garner v Murray.

(e) Name the type of asset used to describe ‘goodwill

QUESTION 4

Thomas and Sandra are in partnership, sharing profits and losses in the ratio 4:1 respectively. The Balance Sheet of the partnership at 31 December 2012 was as follows:

Thomas and Sandra Balance Sheet at 31 December 2012

Fixed Assets€€€

Partners’ Capital Accounts

Thomas and Sandra agreed that, from 1 January 2013, profits and losses would be shared in the ratio 3 : 1 respectively. It was also agreed that certain assets would be re-valued.

€

Freehold Premises / 140,000
Motor Vehicles / 34,000
Fixtures and Fittings / 10,000
Stocks / 11,900
Goodwill / 44,000

It was further agreed that goodwill should no longer appear as an asset in the partnership books.

REQUIRED

Record the above in the books of the partnership by preparing the:

(a) / Revaluation Account / (6 marks)
(b)
(c) / Partners' Capital Accounts, in columnar format
Goodwill Account / (5 marks)
(3 marks)
(d) / Balance Sheet of the revised partnership at 1 January 2013. / (11 marks)

QUESTION 5

Garcia and Martino are in partnership sharing profits and losses in the ratio 2:1. At 30 June 2011, their Balance Sheet was as follows:

Fixed Assets
Goodwill / € / €
40,000
Premises / 70,000
Office equipment / 25,000
Fixtures and fittings / 20,000
155,000
Current Assets
Stock / 12,000
Debtors / 18,000
Bank / 8,000
38,000
Creditors: amounts falling due within one year
Creditors / 13,000
Net Current Assets / 25,000
180,000
Capital
Garcia / 120,000
Martino / 60,000
180,000

Zarita was admitted into the partnership on 1 July 2011 and it was agreed that all future profits and losses would be shared equally. Zarita introduced into the partnership, stock valued at €40,000, debtors of €5,000 and sufficient cash to cover his share of goodwill.

At the same time, some assets and liabilities of the old partnership were revalued as follows:

€
Goodwill / 60,000
Premises / 120,000
Office equipment / 15,000
Stock / 12,600
Creditors
REQUIRED / 13,900

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(a) The Revaluation Account of Garcia and Martino.

(7 marks)

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(b) The Capital Accounts of Garcia, Martino and Zarita, following the revaluation of assets and liabilities and the admission of Zarita. It was decided that goodwill would not be retained in the books of the new partnership.

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(d) State three items to be found in a partnership agreement other than profit sharing ratios.

(9 marks)

(6 marks)

(3 marks)

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(Total 25 marks)

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