Question
In: Accounting
The Muneer, Majid, and Mahmood partnership had two assets: (1) cash of RO 120,000 and (2)...
The Muneer, Majid, and Mahmood partnership had two
assets:
(1) cash of RO 120,000 and
(2) an investment with a book value of RO 330,000. The
ratio for sharing profits and losses is 6:3:3. The balances in the
capital accounts were:
Muneer, capital: RO 45,000
Majid, capital: RO 75,000
Mahmood, capital: RO 30,000
Required:
If the investment was sold for RO 240,000, how much cash would each
partner have received?
Solutions
Expert Solution
| Muneer, Majid and Mahmood | ||||||
| Statement for cash would each partner have received: | ||||||
| Amount in RO | ||||||
| Particulars | Cash + | Investment= | Retained earnings (Profit & Loss) + | Capital Muneer (6/12)+ | Capital Majid (3/12)+ | Capital Mahmood (3/12) |
| Opening Balances | 1,20,000 | 3,30,000 | 3,00,000 | 45,000 | 75,000 | 30,000 |
| Sales of investment and loss (Refer note-1) | 2,40,000 | (3,30,000) | - | (45,000) | (22,500) | (22,500) |
| Balances after sale of investment | 3,60,000 | - | 3,00,000 | - | 52,500 | 7,500 |
| Distribute the retained earning (Refer note-2) | - | - | (3,00,000) | 1,50,000 | 75,000 | 75,000 |
| Balances after retained earnings | 3,60,000 | - | - | 1,50,000 | 1,27,500 | 82,500 |
| Cash distributed to partners (Refer note-3) | (3,60,000) | - | - | (1,80,000) | (90,000) | (90,000) |
| Final balances (Refer note-4) | - | - | - | (30,000) | 37,500 | (7,500) |
| Note-1: Investment sold in cash RO 2,40,000 and remaining loss RO 90,000 distributed in partner's capital account in the ratio of (6:3:3). | ||||||
| Note-2: It is assume that in liabilities side the balance of retained earnings RO 3,00,000 other than partner's capital. Retained earning is distributed in partner's capital account in the ratio of (6:3:3). | ||||||
| Note-3: Cash RO 3,60,000 distributed in partner's capital account in the ratio of (6:3:3). | ||||||
|
Note-3: As per ratio, Capital deficiency of Muneer & Mahmood, however Majid positively, in this way if cash distribute as per balance amount, here no found deficiency and all account is NIL. Otherwise Cash RO 30,000 & RO 7,500 will be brought by Muneer & Mahmood.
|
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