Theory question 108
Partnership Admission, Retirement and DissolutionRomeo and Juliet were in partnership and shared profits and losses equally. They decided to dissolve the partnership on 30th April, 2008. As at that date, the partnership balance sheet was as follows:
Romeo and Juliet – Balance Sheet as at 30th April, 2008
Capital: Romeo ₦600,000; Juliet ₦550,000
Current Account: Romeo ₦150,000
Current Liabilities: Trade Creditors ₦100,000
Total ₦1,400,000
Fixed Assets: Plant and Machinery ₦650,000; Delivery van ₦280,000; Fixtures and Fittings ₦170,000 = ₦1,100,000
Current Assets: Stock ₦90,000; Debtors ₦55,000; Cash ₦45,000 = ₦190,000
Current Account: Juliet ₦110,000
Total ₦1,400,000
Additional information:
(i) The following were realised from the assets: Plant and Machinery ₦580,000; Delivery Van ₦225,000; Stock ₦110,000; Debtors ₦50,000
(ii) Creditors were paid in full (iii) Dissolution expenses amounted to ₦50,000 (iv) Fixtures and fittings were taken over by Romeo for ₦100,000
You are required to prepare: (a) Realisation Account; (b) Partners Capital Account in columnar form; and (c) Cash Accounts.
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(a) Realisation Account: Dr plant and machinery 650,000; delivery van 280,000; fixtures 170,000; stock 90,000; debtors 55,000; dissolution expenses 50,000 = ₦1,295,000. Cr cash – plant 580,000, van 225,000, stock 110,000, debtors 50,000; Romeo (fixtures taken over) 100,000; loss on realisation 230,000 shared equally: Romeo 115,000, Juliet 115,000 = ₦1,295,000
(b) Capital Accounts (Romeo / Juliet): Cr balance b/f 600,000 / 550,000; current account 150,000 / – = 750,000 / 550,000. Dr current account – / 110,000; fixtures taken over 100,000 / –; loss on realisation 115,000 / 115,000; cash paid to close ₦535,000 / ₦325,000
(c) Cash Account: Dr balance b/f 45,000; plant 580,000; van 225,000; stock 110,000; debtors 50,000 = ₦1,010,000. Cr trade creditors 100,000; dissolution expenses 50,000; Romeo 535,000; Juliet 325,000 = ₦1,010,000
Close the asset accounts to realisation, share the loss equally, then pay out what is left in each capital account.