On 1 January Year 1, Claire McKay and Sean Cahill went into a business partnership
with respective equity (capital) of £25,000 and £50,000.
(a) The Partnership Agreement was drafted at the Partnership with the following terms:
start of their enterprise.
• A 5% annual interest rate will be paid on equity (capital).
• Each partner will withdraw 20% of the invested equity (capital) annually.
• Annual interest on drawings is 2%.
• Claire McKay will get an annual remuneration of £5,000.
The company has received a long-term loan of £20,000 from Sean Cahill. He
will be given 4% yearly interest.
• Profits will be distributed according to the equity (money) invested.
The company made a profit for the year for the first fiscal year that ended on December 31.
£35,000 in (Net Profit).
You must use the data from the aforementioned sources for the year that concluded on December 31.
Year 1, to get ready for:
Account for Partnership Appropriations (i);
(ii) Each partner’s current account.
(a) Claire and Sean choose to accept Rachael Young as a new student on January 1st, Year 2.
Partner within the aforementioned restrictions.
The assets of the current partnership will be revalued before Rachael is admitted.
Old and New Values of the Asset
Real estate £19,400 $26,000
Equipment £18,000 $14,400
$12,000 $ 10,000 for delivery vans
Stock (Inventory) £28,000 $20,000
• The cost of professional reassessment is £2,000.
• Goodwill is expected to cost £12,000 and will be deducted from equity.
Accounts (capital) of the new partnership.
• Rachael will contribute £25,000 to the partnership as equity (capital).
• Claire and Sean will continue to get 25% of profits, and Rachael will receive the remaining
Similarly, dividing the remaining amount is appropriate.
Determine the new partnership’s cost:
(i) the asset revaluation excess or deficit;
(ii) all three partners’ revised profit-sharing ratios;
(iii) The current equity (capital) balances for Sean Cahill, Claire McKay, and