Brilliant Company

Trial balance
April 30 2021
office supplies 40
prepaid insurance 240
equipment 2500
accumulated depreciation: equipment 35
accounts payable 28
salaries payable 420
unearned lawn mowing revenue 100
common stock 5000
dividends 1000
lawn mowing revenue 2350
gas expense 53
advertising expense 35
depreciation expense: equipment 35
supplies expense 85
Salaries expense 420

7933 7933
 Justin Sole Trader ABC Partnership
Dr Cr cash 488000
$ $ accounts receivables 250000
Capital 225600 allowance for bad debts
Sales and Purchases 266800 365000 merchandise inventory 550000
Inventory at 1st Jan 2020 23340 equipment 180000
returns 1200 1600 accumulated depreciation
Wages 46160 land 150000
Rent 13000 accounts payable
Motor Expenses 3720 salaries payable
Insurance 760 A's Capital
Irrecoverable debts 120 B's Capital
Allowance for receivables C's Capital
1-Jan-20 588 Sales
Discounts 864 1622 cost of sales 510000
Light and Heat 3074 operating expenses 190000
Bank Overdraft interest 74 Totals 2318000
Motor vehicles at cost 24000
Aggregar=te depreciation After closing the nominal accounts, the following asset rev
1-Jan-20 12240 by the partners:
ficture and fittings at cost 28000 1) The allowance for bad debts should be increased to equ
aggregarate depreciation receivables
1-Jan-20 16800 2) The FMV of the merchandise is 29,500 higher than its b
Land 100000 3)The accumulated depreciation should be increased by 1
Receivables and Payables 17330 23004 4) The FMV of the land is twice as much as its book value

Dr Cr The operating expenses consist of all expenses incurred fr

$ $ Financial Position date (December 31, 2019) to the date o
Bank 3412 2020) including adjustment for bad debts expense and dep
Buildings at cost 100000 period. The partners did not make any drawings during the
Aggregate depreciation
1-Jan-20 6000 Required:
Drawings 20800 1. Prepare entries to close the nominal accounts and to ad
reflect the assets' fair market values.
652654 652654 2. Prepare Statement of Financial Position
3. Prepare entries to record the retirement of partner A, as
you are given following additional information a) A is paid 317,500
b) A is paid 287,500
1. inventory at 31 dec 2020 was 25,680$ c) A is paid 332,500
2. Rent was prepaid by $1,000 and light and heat owed was $460 at 31 December 20X5.
3.Land is to be revalued to $250,000 at 31 December 20X5.
4. Following a final review of thereceivables at 31 December 20X5, Kevin decides to write off another debtof $130. He also wis
5. Depreciation is to be provided as follows:
a. building 2% annually, straight line
b. fixtures & fittings at straight line method, assuming a useful economic life of five years with no residual value
c. motor vehicles at 30% annually on a reducing balance basis.

Prepare an income statement for the year ended 31 December 20X5 anda statement of financial position as at that date for
rship

12500

72000

368000
55500
240000
420000
300000
850000

2318000

ccounts, the following asset revaluations were agreed upon

ebts should be increased to equal 8% of the accounts

ndise is 29,500 higher than its book value

iation should be increased by 12,000
wice as much as its book value

nsist of all expenses incurred from the last Statement of

cember 31, 2019) to the date of retirement (February 14,
for bad debts expense and depreciation expense for the
t make any drawings during the period.

the nominal accounts and to adjust the records to

nancial Position
d the retirement of partner A, assuming:

ff another debtof $130. He also wishes to maintain the allowance for receivables at 3%of the year end balance.

th no residual value
ancial position as at that date for Mr Justin .
1. Entries to close the Nominal Accounts
Debit
Sales 850000
Cost of sales
Operating Expenses
Income summary

Profit for period ended feb 14 2020 is 150000

Entry to close the income summary to partner's capital balances

profit loss ratio of 1:2:1
Debit
Income summary 150000
A capital
B capital
C capital

Profit Allocation
Allocation to Partner A 150000x1/4
Allocation to Partner B 150000x2/4
Allocation to Partner C 150000x1/4

2. Entry to adjust the records to reflect the assets at fair value

Asset Balance per trial Balance Adjustment

Allowance for Bad debts -12500 -7500
Mechandise Inventory 550000 29500
Acc Depricaiton -72000 -12000
Land 150000 150000

Asset
Allowance for Bad debts -7500
Mechandise Inventory 29500
Acc Depricaiton -12000
Land 150000
Total Increase in Partner's Captial 160000

Entry to Allocate the increase in Fair Value of Assets to Partners Capital

Debit
Merchandise inventory 29500
Land 150000
Allowance for Bad debts
Acc Depriciatin
A Capital
B Capital
C capital

Partner capital balance after closing of nominal accoutns and the revaluation of the assets
Unadjusted Increase from
Allocation of Profit

Partner A 240000 37500

Partner B 420000 75000
Partner C 300000 37500
 Req 2 Abc Partnership
Credit Statement of Financial Postion
February 14,2020
510000
190000 Cash
150000 Acc receivables - net
Acc receviables
Allowance for bad debts
Merchandize inventory
Total Current Assets

Credit Equipment-net
Equipment-net
37500 Acc dep
75000 Land
37500 Total Assets

Accounts paybale
salaries payable
A capital
B capital
C capital

Total liabilities and partners capital

Adjusted Balance
-20000 (250000x8%
579500
-84000
300000 150000x2

Credit

7500
12000
40000
80000
 40000

assets
Increase from Adjusted
Revaluation of Assets Capital
Balances

40000 317500
80000 375000
40000 377500
rship Req3
ncial Postion A.Partner A is paid 317500
14,2020 payment ot A 317500
Partner A capital 317500
Difference 0
488000
250000 Journal Entry Dr Cr
-20000 230000 A, capital 317500
579500 cash 317500
1297500

B. Partner A is paid 287500

180000 payment ot A 287500
-84000 96000 Partner A capital -317500
300000 Difference -30000
1693500
Bonus method
368000 New profit ratio for the remaing partners are
55500
317500 2:1 for partner b and c Respectivly
575000
377500 Bonus to Remaining partners 30000
Partner's B share 30000 x 2/3 20000
1693500 Partner'C share 30000 x 1/3 10000

Journal Entry
Dr Cr
A Capital 317500
B Capital 20000
C Capital 10000
Cash 287500

C. Partner A is paid 332500

payment ot A 332500
Partner A capital -317500
Difference 15000

Bonus method
New profit ratio for the remaing partners are

2:1 for partner b and c Respectivly

Bonus to Retiring Partner A 15000
Partner's B share 30000 x 2/3 10000
Partner'C share 30000 x 1/3 5000

Journal Entry
 Dr Cr
A Capital 317500
B Capital 10000

C Capital 5000
Cash 332500
Income Statement
Sales all on credit 365200
(returns) -1200 364000
Cost of goods sold
opening stock 23340
purchase 266800
return -1600
288540
closing inentory -25680 -262860

Gross profit 101140

Sundry income
discount received 1622
Decrease in allowance for receivables 72
102834
Expenses
Wages 46160
Rent (13000-1000) 12000
Motoexpenses 3720
Indurance 760
Irrecoverable dets (120+130) 250
Discount allowed 864
Light and heat(120+130) 3534
Bank interest 74

Depriciation
Building 2000
Fixture and fittings 5600
Motor behicles 3528 11128
78490

24344
comprehensive income 150000
Total comprehensive income 174344
 Statement of financial position as 31 december 20x5

Cost Acc. Dep NBV

Non-current assets
Land 250000 0 250000
Building 100000 8000 92000
Fixtures and fittings 28000 22400 5600
Motor Vehicles 24000 15768 8232
402000 46168 355832

Current Assets
Inventory 25680
Receivables (17330-130) 17200
Allowance for receivables (17200x3%) -516
16684
Cost Acc. Dep NBV
prepaid expences 1000
Bank 3412
46776
402608

Capital 225600
Profit 24344
Revaluation surplus (250000-100000 150000
Drawaings -20800
379144

Current liabilities
Payables 23004
Accrued expenses (light and Heat) 460 23464
402608
 Working

Motor vehicles
Cost 24000
Accumulated depriciation -12240
NBV 11760
Depriciation rate 30%
Annual depriciation charge 3528
Liquidity Ratio
Current ratio: Current assets / current liabilty
1.45901639344262

Quick Ratio:Current Asset-Inventory- Prepaid expense)/(Current Liability)

0.926229508196721

Profitability Ratio
Profit margin: Net income/ Net Sales
0.046

Asset usages and investment ratios for 2021

Return on asset: Net income/Average total assets
174344

Return on capital employed: Operating profit/ Owners Equity

0.13840830449827

Debt to Equity ratio:

Total liabilities / Total assets
0.624675324675325

Book value per share ratio

(Shareholder’s equity – Preferred equity) / Total common shares
2.62727272727273

Asset usages and investment ratios

Return on Asset=Net income/average total assets

0.0298701298701299
 Cash Budget
Details April May June
Cas & Bank Balance $15,000 11,700 12,700
Add
Sales - cash 18,000 17,000 16,000
Cash Collection from Drs 66,000 70,000 66,000
99,000 98,700 94,700
Less
Cash Outflow
Cash Flow(10%) 5,000 4,500 3,500
Payment of Crs. 37,800 45,000 40,500
Wages 323,000 22,000 19,000
Rent 500 500 500
Exp. 6,000 6,000 6,000
Fixed deposits 15,000 8,000 13,000
Cash balance (closing) 21,700 12,700 13,200
99,000 98,700 94,700