Melinda and Melissa are partners in a clothing design shoptrading as M&M Boutique. They share profits and losses in theration 2:1.
On 30 June 2017, the statement of financial position was asfollows:
M&M Boutique |
Statement of financial position as at 30 June 2017 |
| | | |
| | N$ | N$ |
Asse ts | | | |
Non-Current Assets | | |
Land & Building | | | 300,000.00 |
Vehic les | | | 60,000.00 |
Goodwill | | | 90,000.00 |
Furniture | | | 30,000.00 |
| | - | 480,000.00 |
| | | |
Current Assets | | | |
Inventories | | 144,000.00 | |
Trade Receivable | | 186,000.00 | |
Bank | | 27,000.00 | |
| | 357,000.00 | 357,000.00 |
Total Assets | | | 837,000.00 |
| | | |
Equity and Liabilities | | |
| | | |
Equity | | | |
Capital: Melinda | | | 450,000.00 |
Capital: Melissa | | | 225,000.00 |
Total Equity | | | 675,000.00 |
| | | |
Non-current liabilities | | |
Long-term borrowings | | 120,000.00 |
| | | |
Current Liabilities | | |
Trade payable | | | 42,000.00 |
| | | |
Total current liabilities | | 42,000.00 |
Total liabilities | | | 162,000.00 |
Total equity and liabilities | | 837,000.00 |
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On 1 July 2017 the decided to admit Melintha to the partnershipon the following conditions: a) Assets should be re-valued asfollows:
i. ii. iii. iv. v. vi.
b) Melintha will
premium for good will for her share.
c) Melinda and Melissa will share the remaining profits in theratio 3:2. Melinda and
Melissa must make cash payments/withdrawals in order to gettheir capital balances in
line with their profit-sharing ratio.
d) Goodwill should not be disclosed in the statement offinancial position after admitting
Melintha.
You are required to:
Calculate the new profit sharing ratio after admission ofMelintha on 01 July 2017. ( 4 marks)
Provide the journal entries of the transactions above. ( 11Marks)
Prepare the capital accounts of the partners in columnar format.
Prepare a statement of financial position of a partnership on 30June 2017. ( 8 Marks)
Discuss in short four reasons for the formation of partnerships( 4 Marks)
Land & buildings Vehicles Furniture Goodwill Inventory
N$ 360, 000.00 N$ 54, 000.00 N$ 16, 000.00 N$ 120, 000.00 N$132, 000.00 N$ 180, 000.00
Trade receivable
obtain 1/5 share of partnership and it was agreed that she wouldpay a
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