Barry, Sammy and Dawn are in partnership sharing profits in the ratio 5:3:2. On January 1, 2017 their capital and current account balances were as follows: Details Capital Accounts Current Accounts Barry 15,000,000 3,000,000 Sammy 12,000,000 2,500,000 Dawn 10,000,000 (500,000) Dr Notes: Partners are to receive salaries as follows: Barry $1,200,000 per annum; Dawn $800,000 per annum. Interest at 5% per annum is to be paid on capitals; while interest at 10% per annum is to be charged on drawings. On April 1, 2017 Barry made a personal loan of $1,500,000 to the business. Interest on the loan is to be paid at %10 per annum quarterly. The loan is to be repaid in full on January 1, 2019. Profit for the year before charging loan interest was $4,800,000. Drawings for the year were Barry, $600,000; Sammy, $350,000; and Dawn, $450,000 Required: For the year ending December 31, 2017 prepare the following: The partners’ capital accounts. The partners’ current accounts. The Profit and Loss Appropriation Account. A Balance Sheet. On January 1, 2018 Sammy decided to retire from the partnership. As a result of this certain assets of the partnership were revalued. The table below gives details of the total assets less current liabilities on December 31, 2017: Details Book value $ Valuation $ Land & buildings 5,000,000 6,400,000 Machinery 2,800,000 2,600,000 Stocks 6,200,000 6,600,000 Debtors 3,500,000 3,400,000 Bank 4,000,000 4,000,000 21,500,000 23,000,000 Creditors (4,500,000) (4,300,000) Net assets 17,000,000 18,700,000 Required: Show the journal entries recording the above revaluations in the partnership books. Show the Revaluation Account on January 1, 2018.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Barry, Sammy and Dawn are in
|
Details |
Capital Accounts |
Current Accounts |
|
Barry |
15,000,000 |
3,000,000 |
|
Sammy |
12,000,000 |
2,500,000 |
|
Dawn |
10,000,000 |
(500,000) Dr |
Notes:
- Partners are to receive salaries as follows: Barry $1,200,000 per annum; Dawn $800,000 per annum.
- Interest at 5% per annum is to be paid on capitals; while interest at 10% per annum is to be charged on drawings.
- On April 1, 2017 Barry made a personal loan of $1,500,000 to the business. Interest on the loan is to be paid at %10 per annum quarterly. The loan is to be repaid in full on January 1, 2019. Profit for the year before charging loan interest was $4,800,000.
- Drawings for the year were Barry, $600,000; Sammy, $350,000; and Dawn, $450,000
Required:
For the year ending December 31, 2017 prepare the following:
- The partners’ capital accounts.
- The partners’ current accounts.
- The
Profit and Loss Appropriation Account. - A Balance Sheet.
- On January 1, 2018 Sammy decided to retire from the partnership. As a result of this certain assets of the partnership were revalued. The table below gives details of the total assets less current liabilities on December 31, 2017:
|
Details |
Book value $ |
Valuation $ |
|
Land & buildings |
5,000,000 |
6,400,000 |
|
Machinery |
2,800,000 |
2,600,000 |
|
Stocks |
6,200,000 |
6,600,000 |
|
Debtors |
3,500,000 |
3,400,000 |
|
Bank |
4,000,000 |
4,000,000 |
|
|
21,500,000 |
23,000,000 |
|
Creditors |
(4,500,000) |
(4,300,000) |
|
Net assets |
17,000,000 |
18,700,000 |
Required:
- Show the
journal entries recording the above revaluations in the partnership books. - Show the Revaluation Account on January 1, 2018.
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