Ahmad and Bilal carry on business in partnership, sharing profits and losses in the proportion of 2/3 and 1/3 respectively. The Balance Sheet at 31st December, 2006 was as follows:<table><thead><tr class="firstRow"><th style="text-align: left;"> </th><th style="text-align: center;">Rs.</th><th style="text-align: left;"> </th><th style="text-align: center;">Rs.</th></tr></thead><tbody><tr><td>Ahmad's Capital</td><td style="text-align: center;">15,000</td><td>Plant and Machinery</td><td style="text-align: center;">4,000</td></tr><tr><td>Bilal's Capital</td><td style="text-align: center;">10,000</td><td>Stock</td><td style="text-align: center;">22,000</td></tr><tr><td>Creditors</td><td style="text-align: center;">2,000</td><td>Debtors</td><td style="text-align: center;">15,000</td></tr><tr><td>Bank Overdraft</td><td style="text-align: center;">15,000</td><td>Cash</td><td style="text-align: center;">1,000</td></tr><tr><td> </td><td style="text-align: center;">42,000</td><td>42,000</td><td style="text-align: center;"> </td></tr></tbody></table> They agreed to admit Saeed into partnership and give him 1/4 share in the profits on the following terms: (1) Saeed should bring Rs.3,000 for Goodwill and Rs.20,000 as Capital. (2) The plant and machinery to be reduced by 10 percent, and a provision to be created for bad debts to the extent of Rs.440. The stock to be taken at a valuation of Rs.25,000. (3) The Capital Accounts of Ahmad & Bilal be adjusted on the basis of their profit sharing ratio. No account of Goodwill is to be opened in the books of the firm. <strong style="margin: 0px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 14px; line-height: inherit; font-family: Aspira, Helvetica, Arial, sans-serif; vertical-align: baseline; color: rgb(51, 51, 51); white-space: normal; background-color: rgb(255, 255, 255);">Required: Make Journal Entries to record the above transactions. Also prepare the Partners’ Capital Accounts and Opening Balance Sheet of the new Firm.

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Ahmad and Bilal carry on business in partnership, sharing profits and losses in the proportion of 2/3 and 1/3 respectively

Ahmad and Bilal carry on business in partnership, sharing profits and losses in the proportion of 2/3 and 1/3 respectively. The Balance Sheet at 31^st December, 2006 was as follows:

	Rs.		Rs.
Ahmad's Capital	15,000	Plant and Machinery	4,000
Bilal's Capital	10,000	Stock	22,000
Creditors	2,000	Debtors	15,000
Bank Overdraft	15,000	Cash	1,000
	42,000	42,000

They agreed to admit Saeed into partnership and give him 1/4 share in the profits on the following terms:
(1) Saeed should bring Rs.3,000 for Goodwill and Rs.20,000 as Capital.
(2) The plant and machinery to be reduced by 10 percent, and a provision to be created for bad debts to the extent of Rs.440. The stock to be taken at a valuation of Rs.25,000.
(3) The Capital Accounts of Ahmad & Bilal be adjusted on the basis of their profit sharing ratio.
No account of Goodwill is to be opened in the books of the firm.

Required:

Make Journal Entries to record the above transactions. Also prepare the Partners’ Capital Accounts and Opening Balance Sheet of the new Firm.

Expert Solution

Amanda K answered 2 years ago

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