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Practice 2c Retirement of Partner
Practice 2c Retirement of Partner
On December 2013 SGM Partnership had the following balance sheet. Gary would like to
withdraw from the Partnership, and asked for partnership’s assets revaluation for his retirement,
and wanted to distribute the differences between the revaluation value and the book value of the
assets to the partners' capitals according to their profit sharing ratio Simon: Gary: Mark = 3:2:1.
The following data is the revaluation of the partnership assets:
Land & Buildings $ 895 000, Motor vehicle $ 200 000 Machinery $ 70 000, Inventory $ 83 000,
Account Receivable $ 160 000.
ASSETS EQUITY AND LIABILITIES
Distribution on net revaluation
Current assets Current liabilities Simon
Bank 690,000 Account payable 145,000 Gary
Account Receivables 165,000 Non-current liabilities Mark
Inventory 87,000 15% Loan Mega Bank 80,000 Cash for Gary = 6494000+48000
Prepaid expenses 20,000 Capital
Non-current assets Capital accounts
Land and buildings 700,000 Simon 759,800
Motor vehicles 240,000 Gary 649,400
Machinery 72,000 Mark 512,600
Goodwill 172,800
Total Assets 2 146 800 Total equity & Liabilities 2 146 800
Instructions: (20 minutes)
a. Calculate the amount cash should be given to Gary upon his retirement (10 points)
b. Complete the new revaluation Balance Sheet for the partnership after Gary retirement
(14 points)