2Jane would bring in 100000 as her capital and an additional sum for her share

2jane would bring in 100000 as her capital and an

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2.Jane would bring in \$100,000 as her capital and an additional sum for her share of goodwill. 3.Goodwill was estimated to have a value of \$90,000. No goodwill account was to be opened in the books of the partnership. 4.Equipment was revalued upwards by \$16,200 and motor vehicles were to be revalued to 60% of the original cost.
Exhibit 12.4 A worked example On 1 April 2015, Paul retired and Jane was admitted to the partnership on the following terms: 5.An item of inventory costing \$2,400 was estimated to have a net realisable value of \$1,800. 6.The allowance for doubtful accounts was to be increased by 2% of trade receivables. 7.The balance due to Paul was to be retained as a long-term loan to the new partnership.
Exhibit 12.4 A worked example The entries in the revaluation account and capital accounts (ignoring other accounts), and the statement of financial position of the new partnership as at 1 April 2015 are as follows: General ledger Revaluation 2015 \$ 2015 \$ \$ Apr 1 1 Motor vehicles [\$178,000 – (\$265,000 × 60%)] Inventory (\$2,400 - \$1,800) 19,000 600 Apr 1 Equipment 16,200 1 Allowance for doubtful accounts (\$63,500 × 2%) 1,270 20,870 20,870
Exhibit 12.4 A worked example Capital Paul Mary Jane Paul Mary Jane 2015 \$ \$ \$ 2015 \$ \$ \$ Apr 1 Goodwill (Workings) 411,15 5 60,000 157,66 5 30,000 100,000 Apr 1 1 1 1 Balances b/f Bank — Capital Bank — Share of goodwill Goodwill (Workings) 274,00 0 45,000 175,00 0 45,000 100,00 0 30,000 Workings:
Paul Mary Jane Paul Mary Jane 2015 \$ \$ \$ 2015 \$ \$ \$ Apr 1 1 1 1 Goodwill (Workings) Revaluation Share of loss Loan from Paul Balances c/d 2,335 411,15 5 60,000 2,335 157,66 5 30,000 100,000 Apr 1 1 1 1 1 Balances b/f Bank — Capital Bank — Share of goodwill Goodwill (Workings) Current ( Note ) 274,00 0 45,000 94,490 175,00 0 45,000 100,00 0 30,000 413,49 0 220,00 0 130,000 413,49 0 220,00 0 130,00 0 Note :You will learn in Chapter 13 that when a partner withdraws, his current account balance is to be transferred to his capital account: (i) Current account with a credit balance: Dr Partner’s current account Cr Partner’s capital account (ii) Current account with a debit balance: Dr Partner’s capital account Cr Partner’s current account
Exhibit 12.4 A worked example Mary and Jane Statement of Financial Position as at 1 April 2015 Non-current assets \$ \$ \$ Equipment (\$353,000 + \$16,200) Motor vehicles (\$265,000 × 60%) 369,200 159,000 528,200 Current assets Inventory (\$26,200 - \$600) Trade receivables Less Allowance for doubtful accounts (\$3,175 + \$1,270) Bank (-\$8,795 + \$100,000 + \$30,000) 63,500 4,445 25,600 59,055 121,205 205,860 Less Current liabilities: Trade payables Net current assets 22,540 183,320 711,520 Less Non-current liabilities: Loan from Paul (\$60,000 + \$411,155) 471,155 240,365
Current accounts: Mary Jane (17,300) (17,300) 240,365 Exhibit 12.4 A worked example Financed by: Capital accounts: Mary Jane 157,665 100,000 257,665 Mary and Jane Statement of Financial Position as at 1 April 2015 \$ \$ \$
Capital withdraw by the outgoing partner Learning Tips A partner is entitled to the return of his capital upon his withdrawal from the partnership. However, recent public examination questions have often stated that the withdrawing partner did not take out the entire capital balance upon withdrawal.
Capital withdraw by the outgoing partner Learning Tips Example 4 (v) A cheque for \$230,000 would be paid to Carrie immediately after her retirement and the remaining

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• Spring '07
• Smith
• Balance Sheet, Generally Accepted Accounting Principles, partner, Financial Position