Jack,

King and Lee are in partnership sharing profits and losses equally. The

position statement of the partnership as at 31

Lee

decides to retire from the business on 1

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 Required:

(a) Prepare

journal entries in general journal form (without narrations) to record the

changes in the partnership.    (narrations not required)           (20 marks)

(b)

Prepare the capital accounts of the partners (in columnar form) to record the changes

in the partnership.                                                                                       (5 marks)

                                                                        (Total:  25 marks)

On 1^st July 2021, Skyline Limited issued a prospectus inviting the public to subscribe for 7,500,000 ordinary shares at an issue price of $8 for each ordinary share. The terms of the share issue are that the issue price is to be settled $2 on application, $4 on allotment and the balance on a call.

Applications were received for 7,500,000 ordinary shares and all application money was received by 20^th July 2021. The company allotted the 7,500,000 ordinary shares on 1^st August 2021. The amount payable on allotment was received by the due date 14^th August 2021.

The company made a call for the balance of the issue price on 3 September 2021. Amounts due on the call were received for 7,400,000 ordinary shares by the due date 17^th September 2021. A shareholder who was allotted 100,000 ordinary shares failed to settle the call money.

On 10^th October 2021 the management of the company decided to forfeit the 100,000 ordinary shares from the defaulting shareholder. The forfeited shares were reissued on 20^th October 2021 at a price of $7.40 per share to be paid for in full on application. The reissued shares were taken up by a shareholder who paid for the shares on the due date 30^th October 2021.  On 15^th November 2021, the company refunded the amount paid by the defaulting shareholder after charging a penalty for the difference between the original issue price and the reissue price.

Required:

The partners

Josh, Kelly and Lee have been carrying out a trading business for several

years. According to the terms of their partnership agreement, profits and

losses are to be shared between Josh 50%, Kelly 30% and Lee 20%. The yearly

salaries of Josh and Lee are $10,000 and $12,000 respectively. Interest of 10%

is allowed on the partners’ capital account balances outstanding as at the

beginning of the financial year. Interest of 10% is allowed or charged on

current account balances outstanding at the beginning of the financial year.

Interest at 10% is charged on drawings for the year irrespective of when the

drawings were made. Interest of 15% is allowed on the loan accounts of the

partners.

The account balances at the

beginning of the financial year (1

The drawings account balances as at 31

For the year ended 31^st

March 2021, the partnership recorded a net profit of $156,000. Josh and Lee

were each entitled to one year salary for the financial year ended 31

The partners Josh, Kelly and Lee have been carrying out a trading business for several years. According to the terms of their partnership agreement, profits and losses are to be shared between Josh 50%, Kelly 30% and Lee 20%. The yearly salaries of Josh and Lee are $10,000 and $12,000 respectively. Interest of 10% is allowed on the partners’ capital account balances outstanding as at the beginning of the financial year. Interest of 10% is allowed or charged on current account balances outstanding at the beginning of the financial year. Interest at 10% is charged on drawings for the year irrespective of when the drawings were made. Interest of 15% is allowed on the loan accounts of the partners.

 The account balances at the beginning of the financial year (1^st April 2020) were:

  The drawings account balances as at 31^st March 2021 were:

For the year ended 31^st March 2021, the partnership recorded a net profit of $156,000. Josh and Lee were each entitled to one year salary for the financial year ended 31^st March 2021.

The partners Josh, Kelly and Lee have been carrying out a trading business for several years. According to the terms of their partnership agreement, profits and losses are to be shared between Josh 50%, Kelly 30% and Lee 20%. The yearly salaries of Josh and Lee are $10,000 and $12,000 respectively. Interest of 10% is allowed on the partners’ capital account balances outstanding as at the beginning of the financial year. Interest of 10% is allowed or charged on current account balances outstanding at the beginning of the financial year. Interest at 10% is charged on drawings for the year irrespective of when the drawings were made. Interest of 15% is allowed on the loan accounts of the partners.

 The account balances at the beginning of the financial year (1^st April 2020) were:

  The drawings account balances as at 31^st March 2021 were:

For the year ended 31^st March 2021, the partnership recorded a net profit of $156,000. Josh and Lee were each entitled to one year salary for the financial year ended 31^st March 2021.

The partners Josh, Kelly and Lee have been carrying out a trading business for several years. According to the terms of their partnership agreement, profits and losses are to be shared between Josh 50%, Kelly 30% and Lee 20%. The yearly salaries of Josh and Lee are $10,000 and $12,000 respectively. Interest of 10% is allowed on the partners’ capital account balances outstanding as at the beginning of the financial year. Interest of 10% is allowed or charged on current account balances outstanding at the beginning of the financial year. Interest at 10% is charged on drawings for the year irrespective of when the drawings were made. Interest of 15% is allowed on the loan accounts of the partners.

 The account balances at the beginning of the financial year (1^st April 2020) were:

  The drawings account balances as at 31^st March 2021 were:

For the year ended 31^st March 2021, the partnership recorded a net profit of $156,000. Josh and Lee were each entitled to one year salary for the financial year ended 31^st March 2021.

In a

partnership, a debit balance in the current account of a partner indicates

that:

In a partnership, the

journal entries to account for interest charged on drawings accounts balances of

partners are:

In a partnership, the

balance in the drawings accounts of partners are transferred to:

When an

existing partner retires or withdraws from a partnership:

I. Accounting for

revaluation of assets is considered

II. Accounting for

goodwill is considered

III. The partnership

pays the balances in the capital and current account of all partners

IV. The profit and

loss sharing ratio of the remaining partners is determined