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
Internal Rate of Return

FINAL ACCOUNTS As pension funds are set up for a specific purpose, and not for trading, we do not prepare the normal trading profit and loss account or the balance sheet. The p

An intersting point to not is that there is a difference in the tax treatment of income from Limitied Liability Companies (LLCs) and Corporations. What is this difference and what

You are a manager at the DaimlerChrysler. Daimler-Chrysler has lost money on the Smart car since the first model rolled off the assembly line in 1998. By bringing its little car in

Debra Motors's 14% coupon rate, semiannual payment, $1,000 par value bonds that mature in 20 years are callable 3 years from now at a price of $1,075. The bonds sell at a price of

MUTUAL DEALINGS A right of set-off is allowed where there have been - (a) Mutual credits, debts or other dealings resulting in pecuniary liabilities, (b) Between the debtor an

Weighing up the costs and benefits You may feel that, when considering a piece of accounting information, provided four main qualities identified are present and it's material

What is Acid-test ratio A measurement of the capability of a business to meet its short-term commitments. It is considered by dividing excluding stock, current assets, by curre

#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

Purchases office supplies on account costing $12,600 during July. It pays $5,500 for these purchases during July and the remainder during August. Office supplies on hand on July 1