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

Recording and reporting Equity, Ask qCamp Corp had the following balances i...

Ask qCamp Corp had the following balances in its stockholders'''' equity at jan 1: Common stock, $2, par value, 450,000 shares issued $900,000 Additional pd in capial 1,200,000 Ret

Explain the term - providing a service, Explain the term - Providing a serv...

Explain the term - Providing a service One way of viewing accounting is as a form of service. Accountants provide economic information to their 'clients', who are numerous user

Compute a confidence interval for minnesota, For this problem we will be wo...

For this problem we will be working with the Ericksen data set for describing the percentage of the population not counted in the US Census from 1980. In this data set we have diff

State the relationship between return and risk, State the relationship betw...

State the relationship between return and risk This relationship between return and risk has significant implications for setting financial objectives for a business. Owners wil

What is amortization, Q. What is Amortization? Amortization -Periodic a...

Q. What is Amortization? Amortization -Periodic and Gradual reduction of any amount, like the periodic write-down ofa BOND premium, cost of an intangible ASSET or periodic paym

journal entries to record the issuance , Prepare journal entries to record...

Prepare journal entries to record the issuance of 100,000 shares of common stock at $20 per share for each of the following independent cases given below: a. Jackson Corporation

Consolidated income statement and consolidated statement , CONSOLIDATED INC...

CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF CHANGES IN EQUITY     The consolidated income statement follows similar principles as those of the consolidated balanc

#title Accounting.., The business changed their policy with regards to the ...

The business changed their policy with regards to the profit mark-upfrom 2018 to 2019 financial year. What was the changed.

Divisible property-bankruptcy, DIVISIBLE PROPERTY The property of the ban...

DIVISIBLE PROPERTY The property of the bankrupt divisible among creditors includes: Property belonging to the bankrupt at the commencement of the bankruptcy; Property ac

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