Illustrations of dissolutions, Financial Accounting

Assignment Help:

Illustrations of Dissolutions

X, Y and Z have been trading as partners sharing profits and losses in the ratio of 2:2:1 on the 1st July 2005, they decided to dissolve the partnership and all the assets were sold in a single transaction in the market.  The balance sheet as at 1s July 2005 was as follows:

 

X, Y and Z

Balance Sheet as at 1.7.2005

 

£

£

NON-CURRENT ASSETS

 

 

Freehold property

 

60,000

Equipment

 

30,000

 

 

90,000

CURRENT ASSETS

 

 

Inventory

16,000

 

Account receivables

9,000

 

Cash at bank

  4,200

 

 

29,200

 

CURRENT LIABILITIES

 

 

Account payables

(6,000)

 

Net current assets

 

  23,200

NET ASSETS

 

113,200

 

 

 

FIANCNED BY:

 

 

Capital accounts   X

 

78,000

                             Y

 

26,000

                             Z

 

   4,000

 

 

108,000

 

 

 

Current accounts    X

1,400

 

                               Y

(600)

 

                               Z

400

    1,200

 

 

109,200

NON-CURRENT LIABILITIES

 

 

Loan from bank

3,000

 

Loan from Y

1,000

    4,000

 

 

113,200

 

The current assets sold on the market fetched the following assets:

 

 

£

Freehold property

62,000

Equipment

9,600

Inventory

5,800

 

 

The receivables paid their amounts in full while payables gave discounts of £200.  The dissolution amounts to £1600.

 

Required:

Prepare the relevant accounts to record the dissolution.

 

Solution

 

Realization account

 

£

 

£

Freehold property

60,000

Cash book equipment

9,600

Equipment

30,000

Property

6,200

Inventory

16,000

Inventory

8,800

Debtors

9,000

Debtors

9,000

Cash book dissolution expenditure

1,600

A/c payables discounts

200

 

 

Loss on dissolution      X

12,000

 

 

                                    Y

12,000

 

______

                                    Z

    6,000

 

116,600

 

116,600

 

 

Cash book account

 

£

 

£

Balance b/d

4,200

Realizable dissolution expense

1,600

Realisation – equipment

9,600

Accounts payables

5,800

Freehold property

62,000

Loan from bank

3,000

Inventory

5,800

Loan from Y

7,000

Accounts receivables

9,000

Capital X

67,400

Capital account Z

  1,600

            Y

13,400

 

92,200

 

92,200

 

 

 

Capital account

 

X

Y

Z

 

X

Y

Z

 

£

£

£

 

£

£

£

Realisation account – loss

12,000

12,000

6,000

Bal b/d

78,000

26,000

4,000

Current account

-

600

-

Current account

1,400

-

400

Cash book (bal. Fig)

67,400

13,400

_____

Cash book (Bal. Fig)

_____

_____

1,600

 

79,400

26,000

6,000

 

79,400

26,000

6,000

 
In the current example, we have assumed that partner Z is solvent and therefore he is in a position to bring in the cash required from him so that full distribution is made to the other partners.

However, in certain situations, a partner/some partners may not be able contribute the additional cash required and thus they are said to be insolvent.


Related Discussions:- Illustrations of dissolutions

GAAP, Principles, concepts and CONVETIONS

Principles, concepts and CONVETIONS

Record the estimated bad debts expense, At year-end (December 31), Chan Com...

At year-end (December 31), Chan Company estimates its bad debts as 0.30% of its annual credit sales of $753,000. Chan records its Bad Debts Expense for that estimate. On the follow

Prepare the journal entries to record retirement of the bond, The December ...

The December 31, 2005, balance sheet of Far Imports includes the following items: The bonds were issued on December 31, 2004, at 97, with Interest payable on June 30 and December 3

INTANGIBLE ASSETS, Baruch Lev, who is a professor of accounting at New York...

Baruch Lev, who is a professor of accounting at New York University and a globally known academic for his research on financial reporting for intangibles, is that the economy has c

Coupon interest rate , Simon Corporation's bonds have 12 years left over to...

Simon Corporation's bonds have 12 years left over to maturity. Interest is paid yearly, the bonds have a $1,000 par value, and the coupon interest rate is 11.5%. The bonds have a y

Prepare a partial balance sheet, On December 31, 2014, Santana Company has ...

On December 31, 2014, Santana Company has $7,194,600 of short-term debt in the form of notes payable to Golden State Bank due in 2015. On January 28, 2015, Santana enters into a re

Compute the npv of the cash flows, Ace Company has a 30 percent marginal ta...

Ace Company has a 30 percent marginal tax rate and uses a 12% discount rate to compute NPV. The firm started a venture that will yield the following before-tax cash flows: year 0,

Determine the profitability index for this project, An investment project r...

An investment project requires a net investment of $100,000 and is expected to generate annual net cash inflows of $25,000 for 6 years. The firm's cost of capital is 12 percent. De

Personal representatives duties-executorship law, Personal representatives ...

Personal representatives duties Personal representation has the following duties; 1) To provide and pay out of the estate of the deceased, the expenses of a reasonable funeral

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd