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

No. 2(a): Completed table showing which characteristics are applicable to each type of business structure:

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:

**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.

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:

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