Illustration of Retirement of a partner
A, B and C have been trading as equal partners having capital contributions of £500,000 and £400,000 and £300,000 respectively as at 1st January 2005. On the same date, B Deared to leave the partnership and A and C were to continue trading as partners sharing profits in the ratio of 2:1. The total amounts due to B could not be paid immediately and thus the remaining partners agreed with B that they will pay 25% of the total due in cash and the balance will be left as a loan earning interest at a rate of 8% per annum.
Meanwhile, goodwill has agreed at £180,000 and B had a credit balance on his current account of £40,000. Goodwill was not to be retained in the books.
Required:
Prepare partners capital accounts record the retirement of B
|
Capital account
|
|
|
A
|
B
|
C
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|
A
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B
|
C
|
|
Goodwill written off
|
120,000
|
-
|
60,000
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Bal. b/d
|
500,000
|
400,000
|
300,00
|
|
Cash book
|
-
|
125,000
|
-
|
Goodwill
|
60,000
|
60,000
|
60,000
|
|
8% loan a/c
|
|
375,000
|
|
Current a/c
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|
40,000
|
|
|
Bal c/d
|
440,000
|
-
|
300,000
|
|
______
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______
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______
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|
|
560,000
|
500,000
|
360,000
|
|
560,000
|
500,000
|
360,000
|