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Unit  1: June 2012, Question #2 (a) & (b)

3/11/2018

2 Comments

 
No. 2(a): Completed table showing which characteristics are applicable to each type of business structure:
Picture
No. 2(b) (i): Below are the necessary double entries related to the preparation of the Capital Adjustment Account for the partnership before the admittance of Janet:
Picture
**Note that the balance on the revaluation account would now be $34,000, as there are two credit entries, $18,000 and $20,000 and a debit entry of $4,000, (18,000+20,000-4,000). The balance of the revaluation account will be split between both partners using the old profit sharing ratio.

Therefore: Kendal’s portion will be ½ x $34,000 = $17,000 and
                    Kwame’s portion will be ½ x $34,000 = $17,000.
Now that all the necessary entries has been identified the Capital Adjustment Account can be prepared.
Picture
Note that the $80,000 brought in by Janet will be entered as follows:
Debit: Cash at Bank         $80,000
                Credit: Janet’s Capital    $80,000
 
No. (b) (ii): Preparation of the Balance Sheet to show the opening position of the new partnership of Kendal, Kwame and Janet:
Picture
I hope that you found this proposed solution helpful! If you did please share it! Also, feel free to ask any questions or to comment below. Best of luck!
2 Comments
Lilia Browne
8/2/2018 03:24:49 pm

Thanks for sharing!! One observation, in the Capital Adjustment Account, the balance B/F for Kendal and Kwame was switched.
In the question Kendal's capital was $96,000 and Kwame's capital was $120,000.

Reply
Krystal
8/14/2018 08:46:13 pm

Hi Lilia,

Thanks so much for sharing your observation. I will double check this as soon possible and once this has been verified the solution presented will be adjusted to correct the error.

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    The author holds a Bsc (Hons) Degree in Applied Accounting from Oxford Brookes University, England and enjoys a successful career as an Accounting Supervisor and a private tutor.

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