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    EXERCISE 3 - Changes in Partnership

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    Aisyah

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    EXERCISE 3 - Changes in Partnership

    Uploaded by

    Aisyah
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    EXERCISE 3- Changes In Partnership

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    8 views2 pages

    EXERCISE 3 - Changes in Partnership

    Uploaded by

    Aisyah

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    FAR160 – CHANGES IN PARTNERSHIP – MAC-AUG2021

    QUESTION 1 (Changes at the beginning/end of the year)

    Kilo and Meter are partners sharing profits and losses equally. The partnership agreement contains
    the following provisions:
    i. Interest on opening capital is 10% per annum.
    ii. Interest on drawings is 5% per annum.

    Given below is the statement of financial position of the partnership as at 31 December 20x4.

    Statement of Financial Position as at 31 December 20x4


    NON-CURRENT ASSETS
    Office equipment (carrying value) 120,000
    Motor vehicles (carrying value) 80,000

    CURRENT ASSETS
    Inventories 24,000
    Accounts receivable 24,000
    Bank 80,000
    328,000

    EQUITY
    Capital - Kilo 160,000
    - Meter 160,000
    Current - Kilo 4,000
    - Meter 800

    CURRENT LIABILITIES
    Accounts payable 3,200
    328,000

    Additional information:
    1. On 1 January 20x5, Gram was admitted as a new partner. He contributed RM100,000 as his
    capital and RM15,600 as premium on goodwill.

    2. Kilo, Meter and Gram agreed to share any profits or losses in accordance to the ratio 2:2:1
    respectively. The interest on capital and interest on drawing will remain unchanged after the
    admission of Gram. Gram is eligible for the interest on capital.

    3. Due to the changes in the partnership, goodwill is to be valued using super profit method at
    three (3) years purchase of the average super profit. The average net profit is RM140,000, the
    average capital employed in the business is RM160,000, the expected rate of return from
    investment is 10% and the remuneration to the partners is estimated to be RM98,000 per
    annum. Goodwill account is to be written off from the partnership book.

    4. Upon admission of Gram, the assets of the partnership were to be revalued as follows:
    RM
    Office equipment 100,000
    Motor vehicles 72,000
    Inventories 20,000
    FAR160 – CHANGES IN PARTNERSHIP – MAC-AUG2021

    5. Drawings made during the accounting period were as follows:


    Amount Date
    Kilo RM8,000 1 April 20x5
    Meter RM4,000 1 October 20x5

    6. Net profit for the year ended 31 December 20x5 for the partnership amounting to RM207,650.

    Required:
    Prepare the following:
    a. Calculate the amount of Goodwill.
    b. Revaluation Account.
    c. Appropriation Statement for the year ended 31 December 20x5.
    d. Partner's Capital Statement (in columnar form).
    e. Partner's Current Statement (in columnar form).

    Key answer:
    Goodwill: RM78,000
    Revaluation loss: Kilo – RM16,000; Meter- RM16,000
    Appropriation profit: Kilo –RM66,400; Meter – RM66,400; Gram- RM33,200
    Balance c/d (capital): Kilo - RM151,800; Meter -RM151,800; Gram -RM100,000
    Balance c/d (current): Kilo - RM78,100; Meter -RM79,1500; Gram -RM43,200

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