ACT102- Introduction to Accounting
Second Semester, 2020 -Take Home Assignment
Total Marks: 20 Marks.
You must use MS Excel to complete this assignment. Due Date: 2 October 2020.
Question No. 1
MST is a partnership owned by M, S and T. The partners’ profit and loss sharing agreement
is 1:3:4 respectively. The adjusted trail balance of the partnership at 30th November 2019 is
given below.
Account Title Dr. $ Cr. $
Cash 9,000
Inventory 10,000
Building 200,000
Accumulated depreciation –Building 60,000
Accounts Payable 7,000
Mortgage Payable 50,000
M Capital 60,000
S Capital 35,000
T Capital 27,000
M Drawings 7,000
S Drawings 4,000
T Drawings 1,000
Sales Revenue 100,000
Cost of Sales 74,000
Salary Expense 22,000
Rent Expense 12,000
Totals 339,000 339,000
Requirements:
1. Prepare an Income Statement, Statement of Changes in Equity, Balance Sheet for the
month ended XXXXXXXXXXUse a separate columnar for each partner in Statement of
Changes in Equity.
2. Compute and Interpret the following ratios based on number 1 above. GP Ratio, NP
Ratio, Return on Capital Employed (ROCE) for the MST Partnership, Cu
ent Ratio,
Quick-Assets Ratio, Debt- Equity Ratio. Indicate the going concern ability and
performance of the business for the month of November 2019.
3. Prepare the closing entries for the month ended XXXXXXXXXX.
4. T decides to withdraw from the partnership on XXXXXXXXXXShe agrees to accept all of
the inventory and all of the cash in exchange for her equity interest in the partnership.
5. Immediately after T’s withdrawal, M and S decide to liquidate the partnership. They
sell the building for $108,000 and then they pay the liabilities and distribute the cash
to complete the liquidation. Journalize these liquidation entries.
(Total Marks: 12 Marks).
Question 2- Liquidation of a partnership
The partnership of E, K and C has experienced operating losses for three consecutive years.
The partners –who have shared profits and losses in the ratio of E, 15%: K, 60%: and C, 25%-
are liquidating the business. They asked you to analyze the effects of liquidation. They present
the following balance sheet as at XXXXXXXXXX.
E, K, C Partnerships
Balance Sheet as at 31 December 2019
Description Dr ($) Cr ($)
Assets:
Cash 14,000
Non-cash assets 160,000
Liabilities:
Accounts payable 65,000
Patterns’ equity
E Capital 21,000
K Capital 69,000
C Capital 19,000
Total 174,000 174,000
Requirements:
1. Prepare a summary of liquidation transactions (as illustrated in exhibits 13-6, 13-7 and
13-8, as appropriate. These exhibits are given in the prescribed text book pages 586,
587 and 588) for each of the following situations
a) The non-cash assets are sold for $ 130,000
) The non-assets are sold for $ 60,000 and any partner with capital deficiency
pays cash to the partnership to cover the deficiency.
c) The non-cash assets are sold for $ 60,000 and any partner with capital deficiency
is personally bankrupt
2. Journalize the liquidation transactions in above three situations
(Total Marks: 8 Marks).
EXHIBIT 13-6 Partnership liquidation-sale of assets at a gain