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(Solved): Adam and Eve are in partnership sharing profits and losses 4:3 respectively. They agreed to amalgama ...



Adam and Eve are in partnership sharing profits and losses 4:3 respectively. They agreed to amalgamate their business with that of Abraham and Sarah as on 30th June, 2020. Abraham and Sarah share profits and losses in the ratio of 3:2 respectively. It was mutually agreed that as January 1, 2021 the partnerships be amalgamated into one firm.
As on December 31 2020, the statements of financial position of the firms were as follows:
Non-current Assets
Property Vehicles Fixtures
Current Assets
Inventory Investment
Trade Receivables Cash and Bank
Capital and Liabilities
Capital Accounts
Adam Eve
Abraham
Sarah
Current Liabilities Trade Payables Bank overdraft
Adam and Eve GHS’000 29,600 12,000 7,200
48,800
33,200 3,200 27,200 13,600
126,000
61,200 44,000
- -
20,800 - 126,000
Abraham and Sarah GHS’000 40,000 7,200 _5,600
56,800
26,400 -
23,200 -
102,400
45,200 29,600
- 24,000
3,600
102,400
_
          4
 
   The agreement to amalgamate contains the following provisions:
i. Provision for doubtful debts at the rate of 5% be made in respect of Receivables and a
provision for discount receivable at the rate 21?2% be made in respect of Payables.
ii. The firm is to take over the old partnership assets at the following values:
Inventory Vehicles Fixtures Property Goodwill
Adam and Eve
GHS’000 33,600 11,200
6,400 40,000 25,200
Abraham and Sarah
GHS’000 25,560 5,200
9,000 45,000 18,000
iii. Eve to take over his firm’s investment at a value of GHS3,040,000.
iv. The capital of the new firm to be GHS216,000,000 and to be contributed by the partners
in profit and loss sharing ratios, any adjustments to be made in cash.
v. Adam, Eve, Abraham and Sarah agreed to share profits and losses in the ratio 6:5:4:3
respectively in the new firm.
Required:
a) Prepare Realisation Account in the books of each of the old firms as at 30 December 2020.
b) Prepare Partners’ Capital Account for the period to 1 January 2021.
c) Prepare Statement of Financial Position as at 1 January 2021


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Answer: The following are the required tables: Adam and Eve Amount ($) Amount ($) Adam 61,200 property 29,600 Eve 44,000 vehicles 12,000 fixtures 7,20
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