Kamau and Kariuki are partners in business sharing profits and losses in the ratio 2:1. The…

Kamau and Kariuki are partners in business sharing profits and losses in the ratio 2:1. The summarised balance sheet for the Partnership as at 30 Jun 2010 is as follows.

Non-current Assets	Shs.	Shs.	Shs.
Premises			9,000,000
Plant			3,700,000
Fixtures			1,700,000

			14,400,000
Current Assets:
Stock		6,200,000
Debtors		4,300,000
Cash		69,800

10,569,800 Current Liabilities:

Creditors	2,700,000
bank Overdraft	5,600,000	(8,300,000)	2,269,800
Non Current Liabilities
Loan Mortgage			(600,000)
			16,069,800

Capital:
Kamau			8,000,000
Kariuki			4,000,000
			12,000,000
Current account
Kamau		3,154,800
Kariuki		915,000	4,069,800
			16,069,800

Ahmed is admitted as a new partner on 30 Jun 2010. The following matters are agreed:

a) Certain assets were revalued. Premises 11,000,000, Plant 3,400,000 and stock 5,400,000

b) A provision on doubtful debt is made for shs. 300 000

c) Kamau, Kariuki and Ahmed are to share profits and losses in the ratio 2:2:1

d) Ahmed is to contribute cash to bring his Capital and Current accounts to the same the original partner from the old firm who has lower investments in the business. Also the partner in the old firm with the higher the higher investment will draw out cash so that his Capital and current account equal those of his new Partners.

e) Goodwill Shs. 600 000 is to be recorded in the books on the day Ahmed is admitted. The partners in the new firm do not wish to maintain a good will account against new partners’ Capital accounts.

Required:

a) Revaluation account

b) Partners’ Capital account

c) Partners’ Current account

d) Balance Sheet for the New Partnership as at 30 June 2010 (20 Marks)