of the net assets of the old partnership it should be shared among the old

Of the net assets of the old partnership it should be

This preview shows page 30 - 40 out of 54 pages.

of the net assets of the old partnership, it should be shared among the old partners in the old profit and loss sharing ratio.
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Revaluation of goodwill 1. A goodwill account had been opened After revaluation, the statement of financial position of the new partnership would be as follows: Jimmy, Sam and Steve Statement of Financial Position as at 1 January 2016 ASSETS $ $ Non-current assets Machinery Motor vehicles 798,000 300,000 1,098,00 0 Goodwill 300,000 1,398,00 0 Current assets Inventory Accounts receivable Cash and bank 160,000 242,000 343,000 745,000 [$143,000 + $200,000 (capital contributed by Steve)] [$143,000 + $200,000 (capital contributed by Steve)] Revalu ed Revalu ed
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Revaluation of goodwill 1. A goodwill account had been opened CAPITAL AND LIABILITIES Capital Capital accounts: Jimmy Sam Steve 540,000 540,000 200,000 1,280,00 0 Current accounts: Jimmy Sam 358,000 314,000 672,000 1,952,00 0 Capital account balances after revaluation Capital account balances after revaluation Jimmy, Sam and Steve Statement of Financial Position as at 1 January 2016 $ $
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Revaluation of goodwill 2. A goodwill account had not be opened (with all other assets and liabilities stated at revalued amounts) On condition that: 1. no goodwill account had been opened in the books of the old partnership; 2. Adjusting entries had been made for the goodwill of $200,000 in the old partners’ capital accounts; 3. No goodwill account was to be opened in the books of the new partnership;
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Revaluation of goodwill The goodwill adjustments made in capital accounts on 1 January 2014 would be as follows:
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Revaluation of goodwill The capital balances shown in the statement of financial position as at 31 December 2015 would have to be: $ Jimm y 300,000 Sam 300,000 Jimmy’s capital balance on 31 December 2015 if no goodwill account had been opened: + - $250,00 0 $150,00 0 $100,00 0 (balance as at 31 December 2013) (goodwill shared in old ratio on 1 January 2014) (goodwill shared in new ratio on 1 January 2014) Sam’s capital balance on 31 December 2015 if no goodwill account had been opened: + - $350,00 0 $50,000 $100,00 0 (balance as at 31 December 2013) (goodwill shared in old ratio on 1 January 2014) (goodwill shared in new ratio on 1 January 2014) $300,00 0
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Revaluation of goodwill The required adjusting entries for the revaluation on 1 January 2016 would be as follows: General ledger Revaluation 2016 $ $ 2016 $ Jan 1 1 Motor vehicles Inventory 60,000 18,000 Jan 1 Machinery 258,000 258,00 0 258,000 $360,000 – $300,000 $360,000 – $300,000 $798,000 – $540,000 $798,000 – $540,000 $178,000 – $160,000 $178,000 – $160,000
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Revaluation of goodwill Capital Jimmy Sam Steve Jimmy Sam Steve 2016 $ $ $ 2016 $ $ $ Jan 1 1 1 Balances b/f Cash Revaluation Share of profit 300,00 0 90,000 300,00 0 90,000 200,00 0
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Revaluation of goodwill Capital Jimmy Sam Steve Jimmy Sam Steve 2016 $ $ $ 2016 $ $ $ Jan 1 1 1 Balances b/f Cash Revaluation Share of profit 300,00 0 90,000 300,00 0 90,000 200,00 0 Workings: Jan 1 Goodwill (Workings) 120,00 0 120,000 60,000 140,000 1 Goodwill (Workings) 150,00 0 150,00 0 1 Balances c/d 420,00 0 420,000 140,000 540,00 0 540,000 200,000 540,00 0 540,00 0 200,00 0
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Capital contributed by the new partner Learning Tips When a new partner is admitted, he is required to bring in capital. In recent years, the amount of capital introduced by the new partner in public examination questions has not been as straightforward as in the past.
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  • Spring '07
  • Smith
  • Balance Sheet, Generally Accepted Accounting Principles, partner, Financial Position

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