Amount $ 20
Grange has been operating a small business, taking tourists on trips to the wineries in the Barossa Valley, South Australia. One of his friends, Hermitage, who operates a farm producing lavender oil, strawberries and olives, suggests that they form a partnership and conduct guided tours of the area using his farm as a base.... View complete question »
Grange has been operating a small business, taking tourists on trips to the wineries in the Barossa Valley, South Australia. One of his friends, Hermitage, who operates a farm producing lavender oil, strawberries and olives, suggests that they form a partnership and conduct guided tours of the area using his farm as a base.
1st September, 2012 Grange "and Hermitage form a partnership sharing profits equally and trading as "Barossa Escape".
Their assets and liabilities on that date are:
Grange: Cash $10,000, Office Furniture & Equipment $15,000,
Motor Vehicles $52,000, Inventories $3,000, Accounts Payable $5,000
Hermitage: Cash $3,000 Accounts Receivable $7,000, Property $80,000, Motor Vehicle $35,000, Office Furniture & Equipment $5,000, Accounts Payable $15,000, Mortgage Loan $40,000
Prepare the General Journal entries to record the assets and liabilities contributed by the partners.
Prepare a fully classified Balance Sheet of Barossa Escape on 1st September, 2012.
From the information provided on the 30th June 2014 (2 years later) record the following partnership adjustments, determination of profit and profit distribution.
Net Profit for the year ended 30 June, 2014 was $910,000
Other operating expenses $655,432 and other operating revenue $26,304.
Profits and losses are shared equally by the partners.
Interest allowed on a Loan by Grange $700.
Grange is to be owed a salary of $75,000 and Hermitage is to be paid in cash a salary of$80,000.
Interest is allowed on partners Fixed Capital and Current Capital balance s at 4% per annum (year).
Partners are each to be allotted a bonus of $4,600 per annum.
Interest on drawings- Grange $310 and Hermitage $390.
Charge Hermitage 5% per annum on his current account deficit.
Drawings made during the year:
Grange: $7,000 Hermitage: $8,000
After all the above transactions have been recorded, transfer partners Drawings to their Current accounts.
Fixed capital account balances are unchanged from 1/9/2012 and are $75,000 for each partner
The Current Account balance on 1/7/13 for Grange is $5,250 (Cr).
The Current Account on 1/7/13 for Hermitage is $6,140 (Dr).
On 31/3/14 Hermitage deposited $5000 cash in his Current Account.
Prepare the General Journal entries for the above adjustments
Prepare the Closing Journal entries for the Profit and Loss account, Profit & Loss Appropriation account and the entry for the transfer of Drawings.
Prepare the Profit and Loss Account, Profit & Loss Appropriation Account and the Partners' Current and Capital Accounts to show the profit distribution for the year ended 30 June 2014.
Prepare a Balance Sheet extract for 30 June, 2014 showing the Equity A/c
In March 2016, Grange and Hermitage discuss taking on a new partner in order to expand the business.
In May 2016 they decide to admit Penfold who is based in Tanunda and operates tours from his base. Penfold will develop tours for the nearby wineries and associated areas and will have a 1/3 share of the profit.
Penfold will contribute: Cash $5,000, Property $54,000 Motor Vehicle $15,000, Accounts Receivable $3,500, and Accounts Payable $2,500 when he joins the partnership on 1/7/16.
Prior to the admission of Penfold as a new partner, Grange and Hermitage decide to adjust the values of some of their assets:
Allowance for doubtful debts to be created $1,500
Vehicles to be depreciated by 15%
Property to be increased in value by $20,000
Office Furniture & Equipment to be depreciated by 30%
(These adjustments to be made on 15 June, prior to the admission of Penfold to the business on 1 July 2016)
After the adjustments have been made, and before the new partner is admitted, the Fixed Capital account balances for Grange and Hermitage are to be adjusted to $75,000 each by transferring to/from their current accounts.
Below is the Balance Sheet of Barossa Escape before the admission of Penfold.
Balance Sheet of Barossa Escape as at 15th June 2016
Cash at bank 23,500
Accounts Receivable 17,000
Total Current Assets 55,500
Motor Vehicles 65,000
Office Furn & Equip 15,000
Total Non-Current Assets 192,500
TOTAL ASSETS 248,000
Accounts Payable 23,000
Total Current Liabilities 23,000
Non – Current Liabilities
Mortgage Loan 19,000
Total Non – Current Liabilities 19,000
TOTAL LIABILITIES 42,000
NET ASSETS 206,000
TOTAL PARTNERSHIP FUNDS 206,000
Prepare the General Journal entries for the capital adjustments and the adjustments to the Fixed Capital Accounts.
Prepare the Equity Adjustment Account.
Show the Capital and Current Accounts for Grange and Hermitage after the Equity Adjustment Account has been prepared. Show the ledger entries to adjust the fixed capital account balances for Grange and Hermitage to $75,000
Show the general journal entry to admit Penfold and prepare Penfold's Capital Account.
Calculate the new profit sharing ratios (Grange & Hermitage had been sharing profits equally).
Prepare a fully classified Balance Sheet on 1/7/16 after the admission of Penfold.
The partnership of Grange, Hermitage and Penfold was dissolved as at 31st March 2018. They had been sharing profits and losses equally. The balance Sheet at that date is
Petty Cash 200
Cash at bank 8,700
Accounts Receivable 15,000
Less Allow for DD (2,000)
Total Current Assets 49,900
Motor Vehicles 40,000
Less Accum Dep (17,000)
Office Furn & Equip 12,000
Less Accum Dep (3,000)
Total Non-Current Assets 192,000
TOTAL ASSETS 241,900
Accounts Payable 24,000
Advance from Grange 7,000
Total Current Liabilities 31,000
Non – Current Liabilities
Mortgage Loan 40,500
Total Non – Current Liabilities 40,500
TOTAL LIABILITIES 71,500
NET ASSETS 170,400
TOTAL PARTNERSHIP FUNDS 170,400
Realisation expenses to wind up the partnership totalled $15 000 + GST.
Grange took over the inventories for $20 000 + GST plus the Mortgage and Property for a total of $125,500 + GST. (GST applies to property only.)
$14,450 was collected from Accounts Receivable (adjust for GST in the shortfall).
Interest due on Loan from Grange was $99 and was paid in cash.
The proceeds from the sale of the other assets totalled $25,000 + GST.
All the liabilities were settled with a discount of $550 obtained when paying Accounts Payable (adjust Discount with GST).
Penfold was personally insolvent. Use the capital accounts for distribution as at 31/3/2018.
Prepare all General Journal entries for the dissolution of the business of Grange, Hermitage and Penfold
Capital and Current accounts for each partner
Cash at Bank account
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