Dissolution of Partnership - Question 1

May, Hope and Cowan are in partnership, sharing profits and losses in the ratio of 2:1:1 respectively.
The Statement of Financial Position of the firm as at 31 March 2008 was as follow:

Statement Of Financial Position as at 31 March 2008

RM RM RM RM
Non-current Asset: Owners' Equity
Freehold Premises 100,000 Capital Accounts
Plant And Machinery 12,000 May 60,000
Motor Vehicles 6,000 Hope 35,000
Fixtures And Fittings 4,000 Cowan 25,000 120,000
122,000
Non-current Liability:
Current Asset Loan From May 20,000
Inventory 12,000
Accounts Receivable 6,500 Current Liability:
Bank 4,100 22,600 Accounts Payable 4,600
144,600 60,000

On 1 April 2008, they were agreed to dissolve the partnership. The following information was given
during dissolution:
(i) The following assets were sold for the following amount:
RM
Freehold premises 70,000
Plant And Machinery 10,000
Motor vehicles 2,000
Inventory 9,000

(ii) May agreed to take over the following assets at:

RM
Freehold Premises 40,000
Motor Vehicles 3,500
Fixtures And Fittings 3,500

(iii) The money received from debtors were RM6,000 and the balances as a discount allowed to them.
(iv) The partners paid RM4,500 in full settlement of the amount owed to the creditors.
(v) Realisation expenses of RM1,200 was paid and Loan From May was settled by cash.

You are required to prepare the following accounts to close the partnership:
(a) Realisation;
(b) Capital (in columnar form);
(c) Bank.
to them.
Answer - Question 1

(a) Realisation
2008 RM 2008 RM
Mar 31 Freehold premises 100,000 Mar 31 Bank
Plant & Equipment 12,000 - Freehold Premises 70,000
Motor vehicles 6,000 - Plant And Machinery 10,000
Fixtures & fittings 4,000 - Motor Vehicles 2,000
Inventory 12,000 - Inventory 9,000
Accounts Receivable 6,500 Capital: Assets Taken Over
Bank - May (Freehold Premises) 40,000
- Realisation Expenses 1,200 - May (Motor Vehicles) 3,500
Capital : Profit on Realisation - May (Fixtures And Fittings) 3,500
- May (2,400 x 2/4) 1,200 Bank
- Hope (2,400 x 1/4) 600 - Accounts Receivable 6,000
- Cowan (2,400 x 1/4) 600 Accounts Payable
- Discount Received 100
144,100 144,100

(c) Bank
2008 RM 2008 RM
Mar 31 Balance b/d 4,100 Mar 31 Realisation - Expenses
Realisation - Realisation Expenses 1,200
- Freehold Premises 70,000 Accounts Payable 4,500
- Plant And Machinery 10,000 Loan From May 20,000
- Motor Vehicles 2,000 Capital
- Inventory 9,000 - May 14,200
- Accounts Receivable 6,000 - Hope 35,600
- Cowan 25,600
101,100 101,100
Answer - Question 2

(b) Capital
May Hope Cowan May Hope Cowan
2008 RM RM RM 2008 RM RM RM
Mar 31 Realisation: Assets Taken Over Mar 31 Balance b/d 60,000 35,000 25,000
- Freehold Premises 40,000 Realisation - Profit 1,200 600 600
- Motor Vehicles 3,500
- Fixture & fittings 3,500
Bank 14,200 35,600 25,600
61,200 35,600 25,600 61,200 35,600 25,600
Dissolution Of Partnership - Question 2
Char, Xiu and Fan had been in partnership for a number of years sharing profit and losses in the
proportion of 2:2:1. The partnership Statement Of Financial Position as at 31 December 2014 was
summarised as follows:
RM
Building 145,000
Furniture 17,900
Motor Vehicles 12,370
Inventory 21,910
Accounts Receivable 9,800
Cash 9,000
Bank Loan 43,110
Accrued Salary 4,300
Accounts Payable 8,800
Bank Overdraft 21,770
Current Account:
- Char 20,000
- Xiu 13,000
- Fan (35,000)
Capital Account:
- Char 60,000
- Xiu 60,000
- Fan 20,000

The partners decided to dissolve the partnership at 1 January 2015. The following were the details
regarding the dissolution:
(i) The assets were taken over as follows:
- Motor vehicles taken by Char and Xiu at agreed values RM5,700 and RM2,900 respectively.
- Building was taken over by Char at value RM195,000.
- Part of the inventory was taken over by Xiu at value RM11,000.
(ii) The remaining assets were disposed of for the following amount:
- Furniture at RM 16,000
- Inventory at RM 8,850
(iii) After the partners agreed to allow discount RM 800, the debtors settled all their debts.
(iv) Expenses of realisation amounting to RM 300 was paid by cheque.
(v) Xiu will take responsibility on the accrued salary.
(vi) The Accounts Payable were settled for an amount that was 10% less.
(vii) Bank loan was settled in full by cheque and interest on bank overdraft of RM 280 was accrued and
paid.

Note: The Current account balances were transferred to their Capital accounts before making any
adjustments.

You are required to prepare the following accounts to close the partnership:
(a) Realisation;
(b) Capital (in columnar form);
(c) Bank.
Answer - Question 2

(a) Realisation
2015 RM 2015 RM
Jan 1 Building 145,000 Jan 1 Capital: Assets Taken Over
Furniture 17,900 - Char (Motor Vehicle) 5,700
Motor vehicles 12,370 - Xiu (Motor Vehicle) 2,900
Inventory 21,910 - Char (Building) 195,000
Accounts Receivable 9,800 - Xiu (Inventory) 11,000
Bank Bank
- Dissolution cost 300 - Furniture 16,000
- Interest On Overdraft 280 - Inventory 8,850
Capital: Profit on realisation - Accounts receivable 9,000
- Char (41,770 x 2/5) 16,708 Accounts Payable 880
- Xiu (41,770 x 2/5) 16,708 - Discount Received
- Fan (41,770 x 1/5) 8,354
249,330 249,330

(c) Bank
2015 RM 2015 RM
Jan 1 Cash 9,000 Jan 1 Balance b/d 21,770
Realisation Realisation
- Furniture 16,000 - Dissolution Cost 300
- Inventory 8,850 Account payable 7,920
- Accounts receivable 9,000 Realisation
Capital - Char 103,992 - Interest On Overdraft 280
Capital - Fan 6,646 Bank Loan 43,110
Capital - Xiu 80,108
153,488 153,488
Answer - Question 2

(b) Capital
Date Particular Char Xiu Fan Date Particular Char Xiu Fan
2015 RM RM RM 2015 RM RM RM
Jan 1 Current - - 35,000 Jan 1 Balance b/d 60,000 60,000 20,000
Realisation: Assets Taken Over Current 20,000 13,000 -
- Motor Vehicle 5,700 2,900 - Accrued salary - 4,300 -
- Building 195,000 - Realisation - Profit 16,708 16,708 8,354
- Inventory - 11,000 - Bank 103,992 - 6,646
Bank - 80,108 -
200,700 94,008 35,000 200,700 94,008 35,000
Dissolution Of Partnership - Question 3
Yao, Hao and Yang had been in partnership for a number of years sharing profits and losses in the
proportion of 2:1:1. The details of the partnership were as follows:

Statement Of Financial Position as at 31 December 2016

Assets RM Equity And Liabilities RM RM
Freehold Premises 100,000 Capital Account:
Furniture And Fixture 18,700 - Yao 60,000
Motor Vehicles 17,500 - Hao 30,000
Investment 10,000 - Yang 10,000 100,000
Inventory 2,770
Accounts Receivable 10,100 Current Account:
Cash in hand 8,210 - Yao 10,770
- Hao 8,890
- Yang (15,180) 4,480

Bank Loan 27,330

Cash at bank 15,600
Accounts Payable 8,020
Accrued Electricity 11,850
167,280 167,280

The partners decided to dissolve the partnership at 31 December 2016. The following were the details
regarding the dissolution:
(i) The assets were disposed for the following amount:
RM
Freehold Premises 76,000
Furniture And Fixture 20,099
Investment 12,000
(ii) The remaining assets were taken over as follows:
Motor vehicles and inventory was taken by Yao and at agreed values RM 13,970 and RM 1,220
respectively. Another part of freehold premises was taken by Yang at value RM 30,000.
(iii) RM 210 was to be written off from accounts receivable as bad debts and discount allowed was
RM 120.
(iv) The creditors were settled for an amount that was 15% less.
(v) The expenses of winding up amounted to RM 850 was paid by Yang.
(vi) Yao will take responsibility on accrued electricity.
(vii) An interest on bank overdraft of RM 190 was accrued and paid.

Yang was insolvent and unable to meet his liabilities to the partnership. His deficiency was to be
apportioned in between Yao and Hao according to the rule in Garner Vs. Murray.

(a) You are required to prepare the following accounts to close the partnership:
(i) Realisation;
(ii) Capital (in columnar form);
(iii) Bank.
(b) List down two reasons of partnership dissolution.
Answer - Question 3
(a)
(i) Realisation
2016 RM 2016 RM
Dec 31 Account Receivables 10,100 Dec 31 Bank
Freehold Premises 100,000 - Freehold Premises 76,000
Furniture and Fixture 18,700 - Furniture and Fixture 20,099
Motor Vehicles 17,500 - Investment 12,000
Investment 10,000 Capital: Assets Taken Over
Inventory 2,770 - Yao (Motor Vehicle) 13,970
Capital - Yang 850 - Yao (Inventory) 1,220
(Expenses of winding up) - Yang (Freehold Premises) 30,000
Bank 190 Bank - Account Receivables 9,770
- Interest On Bank Overdraft Accounts Payable 1,203
Capital: Profit on Realisation - Discount Received
- Yao (4,152 x 2/4) 2,076
- Hao (4,152 x 1/4) 1,038
- Yang (4,152 x 1/4) 1,038
164,262 164,262

(ii) Bank
2016 RM 2016 RM
Dec 31 Cash 8,210 Dec 31 Balance b/d 15,600
Realisation: Account Payable 6,817
- Freehold Premises 76,000 Bank Loan 27,330
- Furniture and Fixture 20,099 Realisation 190
- Investment 12,000 - Interest on bank overdraft
- Account Receivable 9,770 Capital - Yao 47,311
Capital - Hao 28,831

126,079 126,079
Answer - Question 3

(iii) Capital
Yao Hao Yang Yao Hao Yang
2016 RM RM RM 2016 RM RM RM
Dec 31 Current - - 15,180 Dec 31 Balance b/d 60,000 30,000 10,000
Realisation: Assets Taken Over Current 10,770 8,890 -
- Motor Vehicle 13,970 - - Accrued Electricity 11,850 - -
- Inventory 1,220 - - Realisation
- Freehold Premises - - 30,000 - Expenses of winding up - - 850
Capital - Yang 22,195 11,097 - Realisation - Profit 2,076 1,038 1,038
Bank 47,311 28,831 - Capital - Yao - - 22,195
Capital - Hao - - 11,097
84,696 39,928 45,180 84,696 39,928 45,180

(b) A partnership may dissolve due to the following reasons:

i. Disagreement among partners
ii. Business suffering heavy losses or no longer profitable
iii. Expiration of the time period specified in partnership agreement
iv. Death, bankruptcy or retirement of a partner and without replacement
v. Dissolution by court order
vi. Conversion of a partnership into a limited company
Dissolution Of Partnership - Question 4

Bao, Ya and Gou are in partnership for 7 years and sharing profits and losses in the ratio of 4:2:1. They
decided to dissolve the partnership at 30 April 2015. The following was the trial balance of the
partnership at the date of dissolution:

Statement Of Financial Position as at 30 April 2015

Assets RM RM Equity And Liabilities RM RM
Office Equipment 16,300 Capital Account:
Less: Accumulated Depreciation (2,000) 14,300 - Bao 40,000
- Ya 20,000
Motor Vehicles 52,100 - Gou 10,000 70,000
Less: Accumulated Depreciation (12,100) 40,000
Current Account:
Furniture 3,230 - Bao 18,700
Less: Accumulated Depreciation (730) 2,500 - Ya 11,260
- Gou (20,510) 9,450
Goodwill 5,000
Inventory 16,300 Accounts Payable 23,100
Accounts Receivable 5,560
Bank 18,890
102,550 102,550
Additional information:
(i) The following assets were disposed at:
RM
Office Equipment 10,000
Inventory 16,000
(ii) Part of the motor vehicles were sold for RM 8,000 and the remaining was taken over by Bao at
RM 20,000.
(iii) The furniture was confirmed as a total loss.
(iv) Goodwill was valued at nil.
(v) Debts of RM200 was to be written of as bad and the remaining was settled by allowing discount
RM800.
(vi) Dissolution expenses of RM 1,815 was paid.
(vii) Bao would settle the creditors on behalf of the business after the dissolution and received total
discounts of RM 2,310.
(viii) Gou could only pay 40% of the debit balance on his Capital account. It was agreed that this
deficiency was to be borne between Bao and Ya according to the Garner Versus Murray rule.

You are required to prepare the following accounts to close the partnership:
(a) Realisation;
(b) Capital (in columnar form);
(c) Bank.
Answer - Question 4

(a) Realisation
2015 RM 2015 RM
Apr 30 Office Equipment 14,300 Apr 30 Bank
Motor Vehicles 40,000 - Office Equipment 10,000
Furniture 2,500 - Inventory 16,000
Goodwill 5,000 - Motor Vehicles 8,000
Inventory 16,300 Capital: Assets Taken Over
Accounts Receivable 5,560 - Bao (Motor Vehicles) 20,000
Bank Bank
- Dissolution Expenses 1,815 - Accounts Receivable 4,560
Accounts Payable
- Discount Received 2,310
Capital: Loss on Realisation
- Bao (24,605 x 4/7) 14,060
- Ya (24,605 x 2/7) 7,030
- Gou (24,605 x 1/7) 3,515
85,475 85,475

(c) Bank
2015 RM 2015 RM
Apr 30 Balance b/d 18,890 Apr 30 Realisation 1,815
Realisation - Dissolution Expenses
- Office equipment 10,000 Capital - Bao 39,820
- Inventories 16,000 Capital - Ya 21,425
- Motor vehicles 8,000
Realisation
- Accounts Receivable 4,560
Capital - Gou 5,610
63,060 63,060
Answer - Question 4

(b) Capital
Date Particular Bao Ya Gou Date Particular Bao Ya Gou
2015 RM RM RM 2015 RM RM RM
Apr 30 Current account 20,510 Apr 30 Balance b/d 40,000 20,000 10,000
Realisation: Assets Taken Over Current account 18,700 11,260
- Motor Vehicles 20,000 Accounts payable 20,790
Realisation - loss 14,060 7,030 3,515 Bank 5,610
Capital - Gou 5,610 2,805 Capital - Bao 5,610
Bank 39,820 21,425 Capital - Ya 2,805
79,490 31,260 24,025 79,490 31,260 24,025
Dissolution Of Partnership - Question 5
Nip, Pon & Pan were partners dealing groceries business, sharing profits or losses according to the
proportion of their fixed capital respectively. 1 January 2018, they agreed to dissolve the partnership.
The following statement was extracted from the books :

Statement Of Financial Position as at 31st December 2017

Asset RM Equity and Liability RM
Freehold Premises 100,000 Capital Account
Motor Vehicles 80,000 - Nip 140,000
Furniture 35,000 - Pon 70,000
Fixtures And Fittings 28,000 - Pan 35,000 245,000
Investment 21,500 Current Account
Inventory 10,500 - Nip 45,000
Accounts Receivable 7,550 - Pon 45,150
Less: Allowance For Doubtful Debts (250) - Pan (38,150) 52,000
Cash at bank 102,650 Bank Loan 80,000
Goodwill 15,050 Loan From Nip 20,000
Accounts Payable 3,000
400,000 400,000

The following information was given during the dissolution of the partnership:
(i) Half of the fixtures were being taken over by Nip at an agreed valued RM10,500 and a motor
vehicle worth RM19,000 was being taken over by Pon.
(ii) One fifth of the inventory had been taken over by Nip at RM3,500 and the remaining being realised
at RM8,200
(iii) Debts of RM280 was to be written off as bad and cash discount allowed amounted to RM270 was
given to the remaining accounts receivable.
(iv) Goodwill was valued at nil.
(v) The other assets were realised as follows:
RM
- Furniture 17,500
- Motor Vehicles 38,000
- Fixtures And Fittings 9,500
- Investment 13,000
- Freehold Premises 110,000
(vi) Pon will responsible one third of the accounts payable and the remaining settled by a cheque worth
RM1,800. The cost of dissolution was RM1,000 and paid by cheque.
(vii) Pan was insolvent and therefore unable to meet his liabilities to the partnership. His deficiency was
to be apportioned in between Nip and Pon according to the rule in Garner Vs. Murray.

You are required to prepare the following accounts to close the partnership:
(a) Realisation;
(b) Partners’ Capital (in columnar form);
(c) Bank.
Answer - Question 5

(a) Realisation
2018 RM 2018 RM
Jan 1 Freehold Premises 100,000 Jan 1 Allowance For Doubtful Debts 250
Motor Vehicles 80,000 Capital: Assets Taken Over
Furniture 35,000 - Nip (Fixture) 10,500
Fixtures And Fittings 28,000 - Pon (Motor Vehicle) 19,000
Investment 21,500 - Nip (Inventory) 3,500
Inventory 10,500 Bank
Accounts Receivable 7,550 - Inventory 8,200
Goodwill 15,050 - Accounts Receivable 7,000
Bank- Dissolution Cost 1,000 - Furniture 17,500
- Motor Vehicle 38,000
- Fixture and Fitting 9,500
- Investment 13,000
- Freehold Premises 110,000
Accounts Payable 200
- Discount Received
Capital: Loss on Realisation
- Nip (61,950 x 4/7) 35,400
- Pon (61,950 x 2/7) 17,700
- Pan (61,950 x 1/7) 8,850
298,600 298,600

(c) Bank
2018 RM 2018 RM
Jan 1 Balance b/d 102,650 Jan 1 Accounts Payable 1,800
Realisation Bank Loan 80,000
- Inventory 8,200 Loan From Nip 20,000
- Accounts Receivable 7,000 Realisation - Dissolution Cost 1,000
- Furniture 17,500 Capital
- Motor Vehicle 38,000 - Nip 127,600
- Fixture and Fitting 9,500 - Pon 75,450
- Investment 13,000
- Freehold Premises 110,000
305,850 305,850
Answer - Question 5

(b) Capital
Date Particular Nip Pon Pan Date Particular Nip Pon Pan
2018 RM RM RM 2018 RM RM RM
Jan 1 Current 38,150 Jan 1 Balance b/d 140,000 70,000 35,000
Realisation: Assets Taken Over Accounts Payable 1,000
- Fixture 10,500 Current 45,000 45,150
- Motor Vehicles 19,000 Capital - Nip 8,000
- Inventory 3,500 Capital - Pon 4,000
Realisation - Loss 35,400 17,700 8,850
Capital - Pan 8,000 4,000
Bank 127,600 75,450
185,000 116,150 47,000 185,000 116,150 47,000