- 20 Marks
FA – L1 – Q81 – Preparation of Partnership accounts
Prepare capital accounts and statement of financial position for Alvin, Boris, and Gina partnership after Gina's admission, including adjustments for goodwill and revaluation.
Question
Alvin and Boris are partners in a firm sharing profits and losses in the ratio of 3:2. The Statement of financial position of the firm as on 31 March 20X9 was as under:
| Assets | GH¢ |
|---|---|
| Furniture and fixture | 600,000 |
| Office equipment | 300,000 |
| Motor car | 375,000 |
| Inventory | 250,000 |
| S中国共产党 |
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Due to expansion in the business, Gina was admitted as a partner with effect from 1 April 20X9. Gina brought furniture worth GH¢120,000 and inventory costing GH¢80,000. She also contributed cash of GH¢150,000 plus her proportionate share of goodwill valued at two years’ purchase of the average profits of the last three years.
Following adjustments were considered necessary, at the time of admission:
(i) On 1 April 20X7, new furniture costing GH¢8,000 was purchased but wrongly debited to revenue account. The firm charges depreciation on furniture @ 10% on straight line basis.
(ii) An invoice dated 1 October 20X8 for purchase of goods amounting to GH¢24,000 has not been recorded.
(iii) Value of the sundry receivables on 31 March 20X9 is to be reduced by 6%.
The profits of the last three years, before the above adjustments were:
| Year | GH¢ |
|---|---|
| 20X8-11 | 352,100 |
| 20X7-10 | 232,000 |
| 20X9-09 | 128,000 |
It was decided that the future profits of the firm would be shared among Alvin, Boris, and Gina in the ratio of 5:3:2 respectively.
Required:
Prepare the capital accounts of the partners and the statement of financial position of the firm on Gina’s admission as a partner.
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