Question

Jack and Lewis have been in partnership for some years sharing profits and losses equally. They had no partnership agreement. Their statement of financial position at 30 September 2015 showed the following information. Non-current assets Net current assets 230 000 60 000 290 000 Capital accounts Jack Lewis 200 000 70 000 270 000 Current accounts Jack Lewis Opening balance Share of profit Drawings Closing balance 31 000 15 000 (21 000) 25 000 17 000 15 000 (37 000) (5000) 20 000 290 000 Additional information: On 1 October 2015 Albert joined the partnership. A partnership agreement was drawn up. The terms set out in the agreement were:

Answer 1

Partners Capital Account
Particulars		Jack	Lewis	Albert	Particulars		Jack	Lewis	Albert
To Current A/c			$   5,000.00		By Balance B/d		$ 200,000.00	$ 70,000.00
To Jack and Lewis				$   20,000.00	By Current A/c		$   25,000.00
To Interest on Draw.		$     1,050.00	$   1,850.00		By Bank				$   80,000.00
To Balance c/d		$ 265,950.00	$ 92,150.00	$   80,000.00	By Revaluation		$   12,000.00	$ 12,000.00	$   12,000.00
					By Albert		$   10,000.00	$ 10,000.00
					By interest on Cap		$   20,000.00	$   7,000.00	$     8,000.00
		$ 267,000.00	$ 99,000.00	$ 100,000.00			$ 267,000.00	$ 99,000.00	$ 100,000.00

Workings:

	Revaluation Account
To Net current assets		$    4,000.00	By Non current assets		$ 40,000.00
To Profit shared:
Jack	$ 12,000.00
Lewis	$ 12,000.00
Albert	$ 12,000.00	$ 36,000.00
		$ 40,000.00			$ 40,000.00

Adjustment of Goodwill
Raising Goodwill at old profit sharing ratio among existing partners
Particulars		Debit	Credit
Goodwill		$ 60,000.00
To Jack			$ 30,000.00
To Lewis			$ 30,000.00
Writing off Goodwill at new profit sharing ratio among all the partners
Particulars		Debit	Credit
Jack		$ 20,000.00
Lewis		$ 20,000.00
Albert		$ 20,000.00
To Goodwill			$ 60,000.00
Adjusting Entry
Particulars		Debit	Credit
Albert		$ 20,000.00
To Jack			$ 10,000.00
To Lewis			$ 10,000.00