FA – Nov 2020 – L1 – SB – Q6b – Partnership Accounts

Prepare the revaluation account, partners' capital accounts, and the statement of financial position.

Question

b. Emeka has been in business as a Japan spare part dealer. The last statement of financial position of his business as at September 30, 2019, is given below:

	N’000	N’000
Equity
Capital	1,000
Retained earnings	130
	1,130
Drawings	(60)
	1,070
Non-current assets:
PPE		1,100
Current assets:
Inventories		190
Trade payables		40
Bank		45
	1,375	1,375

On October 1, 2019, he agreed with Bode to join him, and the new business will trade under the name and style EmBo Ventures.

Terms of the new business:

Bode is to contribute capital of N1,250,000 for an equal share of profits.
The firm will take over the assets and liabilities of Emeka at their book values, except for:
- PPE: N1,250,000
- Inventories: N175,000
The partners will maintain equal capital, and any shortfall in Emeka’s capital should be made good by credit from revaluation or through additional funds.

Required:

Prepare for EmBo Ventures: i. Revaluation account (5 Marks)
ii. Partners’ capital accounts (5 Marks)
iii. Statement of financial position as at October 1, 2019 (5 Marks)

(Total: 15 Marks)

Answer