Revaluation Account for Partnership
Chan, Tan and Eric were in partnership sharing profits and losses in the ratio Chan 2/3, Tan
1/4 and Eric 1/12.
Their summarized Balance Sheet as at 31 October 2000 was as follows:
$ $ $
Fixed Assets (at Book Value)
Premises 120000
Machinery 60000
Motor Vehicle 9000 189000
Current Assets
Stock 14200
Debtors 18000
less Provision for Doubtful Debts 360 17640
Bank 16160
48000
Current Liabilities
Creditors 12000 36000
225 000
Long-term Liabilities
Loan from Chan 9000
216000
Capital Accounts
Chan 144000
Tan 54000
Eric 18000 216000
The partnership did not maintain partners' current accounts.
Chan left the partnership on 31 October 2000 to start his own business.
Tan and Eric continued the partnership, sharing profits in the ratio Tan 3/4 and Eric 1/4.
The following adjustments were made
(a) Premises were valued at $150000
(b) Machinery was revalued at $ 50000
c) Chan took over machinery which had been revalued at $ 20000
(d) Provision for doubtful debts was reduced to $ 260
(e) stock was reduced in value by $ 1200
The value of Goodwill was agreed at $ 48000,but was not remain in the partnership accounts.
Chan agreed not to take the cash due to him,but to let it remain as a loan to the new partnership,with a suitable rate of interest to be agreed.
(a) Draw up the revaluation account to show the above adjustments.
(b)Draw up the three partners Capital accounts,in columnar form,after the adjustments have taken place.
(a) Draw up the revaluation account to show the above adjustments.
(b)Draw up the three partners Capital accounts,in columnar form, after the adjustments have taken place.
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Solution Preview
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Answers
A Revaluation Account
Debit Credit
Particulars Amount Particulars Amount
To Machinery $10,000 By Premises $30,000
To Stock $1,200 By Provision for doubtful debts $100
* To Partners Capital Account (Profit on account of revaluation)
Chan =(8/12)of 18900=12600
Tan =(3/12)of 18900=4725 Note
Eric =(1/12)of 18900=1575 $18,900 $18,900 is the net of debit and credit(balancing figure) =30100-10000-1200
$30,100 $30,100
B Capital Accounts
Debit Credit
Particulars Amount Particulars Amount
Chan Tan Eric Chan Tan Eric
To Machinery $20,000 By Opening Balance $144,000 $54,000 $18,000
To Goodwill $24,000 $8,000 By ...
Solution Summary
The solution provides answers on revaluation account for a partnership. The partnership sharing profits and losses in the ratio are given.