Illustration of maximum possible loss method-partnership, Financial Accounting

Illustration of maximum possible loss method

A, B and C have been partners for several years, sharing profits and losses in the ratio 2:2:1. They decided to dissolve the firm on 31 October 2002, on which date the balance sheet was as follows:

Balance Sheet as at 31 October 2002

ASSETS

Ksh

Ksh

Non Current Assets

 

 

Property plant and equipment:

 

 

-         Land and buildings

 

150,000

-         Plant and machinery

 

77,200

-         Fixtures and fittings

 

17,000

-         Motor vehicles

 

8,000

 

 

252,200

Goodwill

 

100,000

 

 

352,000

Current Assets

 

 

Stock

64,000

 

Debtors

59,000

 

Cash

160

 

 

 

123,160

 

 

475,360

EQUITY AND LIABILITIES

 

 

Capitals:  A

 

100,000

               B

 

60,000

               C

 

40,000

 

 

200,000

Current accounts A

40,000

 

                            B

30,000

 

 

 

70,000

 

 

270,000

Non Current Liabilities

 

 

Loan – A

 

20,000

Current Liabilities

 

 

Creditors

57,000

 

Bank overdraft

128,360

 

 

 

185,360

 

 

475,360

 

1)       The assets were duly sold and monies received as follows:

 

2002

November 17th:

Freehold land and buildings

Sh 259,000

December 19th:

Debtors (Part)

Sh 30,000

 

Stock (Part)

Sh 20,000

 

2003

 

 

January 23rd:

Plant and machinery

Sh 51,000

 

Fixtures and fittings

Sh 12,000

 

Motor vehicles

                Sh  5,000

March 18th:

Stock (Remainder)

Sh 36,000

 

Debtors (Remainder)

Sh 42,000

2)             Provision was made for dissolution expenses Sh 2,400.

3)             As soon as sufficient money was available to pay all outstanding creditors, this was done, discounts being received amounting to Sh 1,000.

4)             Dissolution expenses amounted to Ksh 3,400, and these were paid on 31 March 2003.



Required:

a) Statements showing how the dissolution proceeds would be distributed to partners; ignoring the ruling in Garner Vs Murray.
b) The creditors account, realization account, capital accounts and cashbook.

Solution:

 

Total (Sh)

A

(Sh)

B

(Sh)

C

(Sh)

Distribution

(Sh)

Capitals

200,000

100,000

60,000

40,000

 

19th December: Available cash

70,000

40,000

30,000

_-

 

Maximum possible loss

270,000

140,000

90,000

40,000

 

 

(52,400)

 

 

 

 

 

217,600

(87,040)

(87,040)

(43,520)

 

 

 

52,960

2,960

(3,520)

 

 

 

(1,760)

(1,760)

3,520

 

 

 

51,200

1,200

__-

52,400

Posted Date: 12/11/2012 7:05:04 AM | Location : United States







Related Discussions:- Illustration of maximum possible loss method-partnership, Assignment Help, Ask Question on Illustration of maximum possible loss method-partnership, Get Answer, Expert's Help, Illustration of maximum possible loss method-partnership Discussions

Write discussion on Illustration of maximum possible loss method-partnership
Your posts are moderated
Related Questions
Does a state have the authority to require a U.S.-based multinational corporation to compute its state taxable income on a worldwide combined reporting basis? What about a foreign-


What are the Advantage of limited liability Advantage of limited liability, though, imposes certain obligations on such companies. To start up a limited company, documents of i

The purchase of a car needs a $23,410 loan to be repaid in monthly installments for 4years at 12% annual real interest rate. If annual inflation rate is 4%, find the extra amount t

a company is evaluating a project requiring capital expenditure of 620,000. estimated life of project is four years and no salvage value. estimated net income and net cash flow fro

1. discuss how VAT system works by using relevant examples. 2. list and explain the VAT supply categories; provide relevant examples of each category. 3. provide a recommendation r

Q. A ltd. Company has equity share capital of Rs. 5,00,000 divided into shares of Rs. 100 each. It wishes to gain further Rs. 3,00,000 for expansion cum modernization plans. The co

Determine balance sheet: Income Statements Year Ended December 31, 20X8   Insure Co. Go-med Co. Sales $3,900,000

#questionWise Owls, an NFPO, began operations at the beginning of 20X1 to provide free tutoring and homework assistance, as well as a nutrition program, to low-income immigrant chi

Seattle Health Plans currently uses zero debt financing.  Its operating income (EBIT) $1 million, and it pays taxes at a 40 percent rate.  It has $5 million in assests and because