a) Saeed and Rasheed carried on business in partnership. On 31st December 2007 Saeed retired. Their Balance Sheet at that date was as follows
Liabilities and Capital
Land and Building
Plant and Machinery
Saeed – Capital Account
Rasheed – Capital Account
Patterns and Models
Profits and Losses were shared in the proportions of Saeed two-thirds, and Rasheed one-third. Rasheed agreed to take over the business on the following terms:-
The Land and Building were to be taken over by Saeed at the amount stated in the Balance Sheet, and Rasheed was to rent the premises at Rs. 250 per annum.
Revaluations were to be made which resulted as follows:
Plant and Machinery, Rs. 10,000; Loose Tools, Rs. 4,400; Patterns and Models, Rs. 1,800; and Inventory, Rs. 12,000.
Saeed agreed to allow the amount due to him (Less Rs. 300 which was to be paid to him in cash) to remain as a loan to Rasheed at 5 per cent interest.
Required: Make necessary Journal entries to give effect to the above transactions and prepare Rasheed’s Balance Sheet.
2) The CDE partnership is being liquidated. After all liabilities have been paid and all assets sold, the balances of the partner’s capital accounts are as follows: Ahmad, Rs. 42,000 credit balance; Jawad, Rs. 16,000 debit balance; Ali, Rs. 53,000 credit balance. The partners share profits and losses: Ahmad 10%; Jawad, 60%; Ali, 30%.
(a) How should the available cash (the only remaining asset) be distributed if it is impossible to determine at this date whether Jawad will be able to pay Rs. 16,000 he owes to the firm? Draft the journal entry to record payment of all available cash at this time.
(b) Draft the journal entries to record a subsequent partial payment of Rs. 13,000 to the firm by Jawad, and the distribution of this cash. Prepare a schedule (similar to the one prepared in part a) showing computation of amount to be distributed to each partner.