Partnership: Changes in Ownership
Study the scenario below and answer the question that follows:
Jones and Smith Partnership
The following balance occur in the books of of Jones and Smith who currently share profits/losses equally. the given balances as at 30 June 2020 are:
| Description | Carrying amount | New Values due to change in partnership ownership |
| Capital: Jones | 3 000 | |
| Capital: Smith | 2 000 | |
| Current account: Jones (Dr) | 100 | |
| Current account: Smith (Cr) | 200 | |
| General reserve | 1 000 | |
| Trade accounts payable | 2 400 | |
| Land and Buildings | 5 000 | 8 000 |
| Trade accounts receivable | 1 500 | |
| Bank (Dr) | 500 | |
| Provision for credit losses | 300 | |
| Inventories | 1 500 | 1 200 |
| Goodwill | 2 100 |
Additional Information:
1. Jones and Smith will withdraw or pay in sums of money so that their net interest in the old partnership will be R5 000 each.
2. On the 1st of July they admit Brown as a partner and according to the new partnership agreement, he has to deposit a capital sum of R5 000 in the partnership's bank account.
3. The partners decided that the general reserve should be re-instated in the books of the new partnership.
4. The new partners will share profit and losses equally and the new partnership will be known as JSB partners.
Required:
Prepare all journal entries required to close off the old partnership.
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Use the starting balance sheet, income statement, and the list of changes to answer the question.
| Hopewell Corporation Balance Sheet As of December 31, 2019 (amounts in thousands) |
|||
|---|---|---|---|
| Cash | 29,000 | Liabilities | 24,000 |
| Other Assets | 37,000 | Equity | 42,000 |
| Total Assets | 66,000 | Total Liabilities & Equity | 66,000 |
| Hopewell Corporation Income Statement January 1 to March 31, 2020 (amounts in thousands) |
|
|---|---|
| Revenue | 7,500 |
| Expenses | 2,200 |
| Net Income | 5,300 |
Between January 1 and March 31, 2020:
1. Cash decreases by $300,000
2. Liabilities increase by $400,000
3. Paid-In Capital does not change
4. Dividends paid of $500,000
What is the value for Other Assets on March 31, 2020?
Note: Account change amounts are provided in dollars but the financial statement units are thousands of dollars.
Please specify your answer in the same units as the financial statements (i.e., enter the number from your updated balance sheet).
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Statement of profit or loss and comprehensive income and statement of changes in equity. Determine whether the following transactions would appear in the statement of profit or loss and other comprehensive income. If so explain how they would be disclosed.
(a)A gain on foreign currency translation of $83 000.
(b)As a result of a fall in share prices in a recession, directors decided to write down the value of the company’s investment, Shares in Pluto Ltd, by $80 000.
(c) Loss from discontinued business operations.
(d)Dividend paid of $1 500 000 in total.
(e)Inventory costing $120 000 is sold for $160 000.
(f)A transfer of $500 000 is made to general reserve from retained earnings.
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The following Income Statement and account balance changes apply to this question:
Income Statement for the year:
Sales $1,400,000
Cost of Goods Sold 810,000
Gross Profit $590,000
Operating Expenses 360,000
Net Income before Taxes $230,000
Taxes 34,000
Net Income $196,000
Account Balance Changes during the year:
Accounts Payable increase $6,000
Prepaid expenses decrease $4,500
Taxes Payable increase $8,200
Accounts Receivable decrease $24,000
Additions to Accumulated Depreciation $76,000
Inventory increase $12,000
Accrued liabilities (e.g., Wages Payable) decrease $5,000
What were cash receipts from sales for the year, using the direct method?
| A)$1,412,000 | B)$1,388,000 |
| C)$1,424,000 | D)1,376,000 |
What was the amount of cash payments made during the year for inventory purchases, using the direct method?
| A)$822,00 | B)$804,000 |
| C)$828,000 | D)$816,000 |
What was the amount of cash payments for taxes this year, using the direct method?
| A)$25,800 | B)$51,200 |
| C)$20,800 | D)34,800 |
What was the amount of cash payments for operating expenses this year, using the direct method?
| A)$283,500 | B)$284,500 |
| C)274,500 | D)293,500 |
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