1 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 3 2001 Hong Kong (Code 3501) Model Answer to Question 3
A Smith and P Grant
Trading, Profit & Loss and Appropriation Account
for the year ended 30 April 2001

Sales
Less returns
Cost of sales
Opening stock
Purchases
Less returns

46,830
288,000
1,700
286,300
333,130
42,570

Closing stock
Gross Profit
Expenses
Vehicle running costs
Admin & Property
Selling expenses
Loan interest
Depreciation:
Buildings
Vehicles
Office equipment

483,000
2,800
480,200

290,560
189,640

(80,800 2,000)
(30,250 + 11,000)
(35,000 x 5%)
(.6 x 180,000 x 1%)
[(32,000 - 14,000) x 25%]
(21,000 x 20%)

6,000
78,800
41,250
1,750
1,080
4,500
4,200
137,580
52,060

Net profit
Add:
Interest on drawings
Smith
Grant

720
640
1,360
53,420

Less:
Commission
Smith
Grant

(480,200 x 5%)
(480,200 x 3%)

24,010
14,406
38,416
15,004

Interest on Capital
Smith
Grant

(90,000 x 6%)
(45,000 x 6%)

5,400
2,700
8,100
6,904

Share of Profits
Smith
Grant

- 50%
- 50%

3,452
3,452
6,904

Workings**
Interest on Drawings

5,000 x 8% x 75%
8,000 x 8% x 50%
6,000 x 8% x 50%
5,000 x 8% x 25%

1|Page

Smith

300
320
100
720

Grant

300
240
100
640

2 Chapter 4 Accounting for Partnership

SERIES 3 2008 (CODE 3012) MODEL ANSWER TO QUESTION 1
(a)

Wool and Looe

Trading, Profit and Loss and Appropriation Account
Six Months ended 31 March 2008

Sales
112,300
Less: Cost of Goods Sold: Opening stock
12,300
Purchases
78,100
90,400
Closing stock
14,100
76,300
Gross Profit
36,000
Less: Administrative expenses (Working 1)
12,706
Distribution costs
(Working 2)
12,540
25,246
Net Profit
10,754
Salary Wool
(3,000 x 0.5)
1,500
Balance Wool
(4/7)
5,288
Looe
(3/7)
3,966
10,754
Workings:
1. Administrative expenses Per Trial Balance
Bad debts written off
Reduction in provision for doubtful debts
[0.06 (9,750 150) 1,200]
Straight-line depreciation (0.2 x 25,000 x 0.5)
Reducing balance depreciation
{[(37,000 25,000) 4,800] x 0.3 x 0.5}
Accrual increase
Unrecorded cheque (520 300)
2. Distribution costs Per Trial Balance
Prepayment reduction
Unrecorded cheque

Fixed Assets
Current Assets
Stock
Debtors (9,750 150)
Less: Provision
Prepayments (425 140)
Cash

9,200
150
(624)
2,500
1,080
180
220
12,706

12,100
140
300
12,540

Wool and Looe Balance Sheet at 31 March 2008

Cost Acc.
Dep.
37,000
18,580*

Less: Current Liabilities

Creditors
Accruals (380 + 180)
Bank overdraft (2,100 + 520)
Net Current Assets
Represented by:
Partners Accounts Wool (14,175 + 1,500 + 5,288)
Looe (9,770 + 3,966)

NBV
18,420

14,100
9,600
576

4,750
560
2,620

9,024
285
800
24,209

7,930
16,279
34,699

20,963
13,736
34,699

* 15,000 + 2,500 + 1,080 = 18,580

(21 marks)
(b) Looe is incorrect in suggesting that increasing closing stock value would reduce profit it will increase it.
2
However Looe is correct to say that increasing stock value would not be acceptable accounting
practice stock must be valued at the lower of cost and net realisable value. 2

2|Page

3 Chapter 4 Accounting for Partnership

SERIES 3 2009 (3012) MODEL ANSWER TO QUESTION 5

Sales
Less Cost of goods sold
Gross profit
Less Light and heat
Rent
Depreciation
Salaries
Selling expenses
General expenses
Net profit
Salary
- Ziggy
- Mars
Balance
Balance

[W1]

- Mars
- Ziggy
- Mars
-Ziggy
-Spider

Weighting

Trading, Profit and Loss and Appropriation Accounts

6 months ended
30 June 2008

[W1] (3:2)
900,000
(R)
705,000
[W2]
195,000
(1:1)
7,000
[W3] (7:9)
14,000
[W4]
6,000
[W5]
39,000
(3:2)
18,000
(1:1)
10,000
94,000
101,000
(3,000 x 0.5)
1,500
(6,200 x 0.5)
99,500
(0.6 x 99,500)
59,700
(0.4 x 99,500)
39,800
99,500
(0.333 x 60,000)
(0.333 x 60,000)
(0.333 x 60,000)
[W4]

2+2+2+1+1+1=9
1+1+1+1+1+1=6
3:2

[W2]

January to March 6 9 x 0.20 x 900,000 =

April to June 3 9 x 0.25 x 900,000 =
July to December

[W3]

Weighting

0.25 x 600,000 =

120,000
75,000
195,000
150,000
345,000

1 + 1 + 1 + 1 + 1.5 + 1.5 = 7
1.5 + 1.5 + 1.5 + 1.5 + 1.5 + 1.5 = 9
7:9

3,100
60,000
20,000
20,000
20,000

60,000

January to June
NBV at 30 June (90%)
Charge to 30 June (20% x 0.5 = 10%)
NBV at 1 January (100%)
July to December
NBV at 1 July
Purchase 1 July

54,000
6,000
60,000

54,000
12,000
66,000
Charge 1 July to 31 Dec (30% x 0.5 = 15%) 9,900
56,100
Check : 6,000 + 9,900 = 15,900

[W5]

January to June
Spider
Others [(69,000 9,000) x 0.5]
July to December

3|Page

6 months ended
31 December 2008

600,000
450,000
150,000
7,000
18,000
9,900
30,000
12,000
10,000
86,900
63,100

9,000
30,000
39,000
30,000
69,000

4 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 2 2001 Hong Kong (Code 3501) Model Answer to Question 1
(a)
Wensum, Yare and Ouse
Trading, Profit & Loss and Appropriation Account
for the year ended 30 June Year 20

Sales *
Cost of Sales
Gross Profit
Add: Profit on sale of car**
Less:
Variable expenses
Other expenses

9 months ended
31 March Year 20

750,000
375,000
375,000

(8% x 750,000) 60,000

(300,000 x 9)
12
225,000

Net profit/(loss)
Less:
Interest on capital
Wensum (50,000 x 5% x 75%)
Yare (50,000 x 5% x 75%)
Ouse (30,000 x 5% x 75%)

3 months ended
30 June Year 20

150,000
75,000
75,000
380
75,380
(8% x 150,000)
(300,000 x 3)
12

12,000
75,000

285,000
90,000

87,000
(11,620)

1,875
1,875
1,125
4,875
85,125

Salaries
Yare (5,000 x 75%)
Ouse (3,000 x 75%)

3,750
2,250

(8,000 x 25%)
(6,000 x 25%)

2,000
1,500
3,500
(15,120)

6,000
79,125
Profit share
Wensum (three fifths)
Yare - (one fifth)
Ouse - (one fifth)

47,475
15,825
15,825

(one third)
(one third)
(one third)

5,040
5,040
5,040

(79,125)

15,120

*Calculation of sales
July - December = 600,000 or 100,000 per month
January - June = 300,000 or 50,000 per month
July to March therefore:
6 months x 100,000 =
600,000
3 months x 50,000 =
150,000
750,000
April to June therefore:
3 months x 50,000 =
150,000

**Calculation of profit on sale of car

Cost
Depreciation for year end 30 June Year 17 @ 20%

10,000
2,000
8,000
1,600
6,400
1,280
5,120
5,500
380

Depreciation for year end 30 June Year 18 @ 20%

Depreciation for year end 30 June Year 19 @ 20%
Written down value
Selling price of car
Profit
(b) Journal
Dr

Capital Account - Wensum

Capital Account Yare
Capital Account - Ouse
Workings:
Value of Goodwill
Wensum
Yare
Ouse

4|Page

three fifths
one fifth
one fifth

Cr

24,000

12,000
12,000
90,000
Partners' shares
Old
54,000
one third
18,000
one third
18,000
one third

New
30,000
30,000
30,000

Adj
24,000
(12,000)
(12,000)

5 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 4 2001 Hong Kong (Code 3501) Model Answer to Question 1
(a)
1.11.00 to
30.6.01

764,864
546,331
218,533

(a)
(c)
(b)

Sales
Cost of sales
Gross Profit
Expenses:
Time based
Sales based
Specific

1.7.01 to
31.10.01

362,304
258,789
103,515

49,200
54,633
12,798

24,600
25,879
8,987
116,631
101,902

Net Profit

Total for
Year

1,127,168
805,120
322,048

73,800
80,512
21,785

59,466
44,049

(b)
Less:
Interest on capital (Capital account balance x 5% - time apportioned)
Queen
1,667
833
King
1,333
667
Prince
1,000
500
4,000
2,000
97,902
42,049
Profit Share
Queen
55,944 (4 sevenths)
18,021 (3 sevenths)
King
27,972 (2 sevenths)
6,007 (1 seventh)
Prince
13,986 (1 seventh)
18,021 (3 sevenths)
-42,049
-97,902

176,097
145,951

2,500
2,000
1,500
6,000
139,951
73,965
33,979
32,007
-139,951

(c)
100,135 x 1 =
120,148 x 2 =
90,153 x 3 =
6=
Queen King Prince
Old
New
Adj'mnt

100,135
240,296
270,459
610,890

4 sevenths
116,360
3 sevenths
87,270
29,090 Cr

Workings:
(a)
[(8 x 1)+( 4 x 1.5)] = 14

divided by 6 x 2 = 203,630

2 sevenths
58,180
1 seventh
29,090
29,090

Cr

Period 1.11.00 - 30.6.01 = 9.5

Period 1.7.01 - 31.10.01 = 4.5
Sales 1.11.00 - 30.6.01 therefore = 1,127,168 x 9.5 = 764,864
14
Sales 1.7.01 - 31.10.01 therefore = 1,127,168 - 764,864 = 362,304
(b)
GP = 764,864 x 40 = 218,533
140
GP = 362,304 x 40 = 103,515
140
(c) Equals Sales less Gross Profit

5|Page

1 seventh
29,090
3 sevenths
87,270
-58,180 Dr

6 Chapter 4 Accounting for Partnership

Model Answer to Question 2
(a)
Provisional Net Profit

86,010
Add

[1]

Selling
Less:10,000 - (4000 + 2,400) =

[2]

500 x 25% =
500 - 250 =

100=

[3]

Deduct

5,000
3,600
1,400
125
4,000
5,525

250
____
250

5,275

Revised Net Profit

91,285
(b) Interest on Drawings Charge
01 Apr
01 Jul
01 Oct
01 Jan

Philips

500

10,000 x 5% =
9,000 x 5% =
8,000 x 5% x 75% =
6,000 x 5% x 75% =
4,000 x 5% x 50% =
6,000 x 5% x 50% =
8,000 x 5% x 25% =
4,000 x 5% x 25% =

Windsor

450

300
225
100
150
100
_____
1,000

50
875

(c)
Philips & Windsor
Appropriation Account year ended 31 March 2002

Net Profit
Add: Interest on drawings
Philips
Windsor

91,285

1,000
875
1,875
93,160

Less: Interest on capital

Philips [6%]
Windsor [6%]

6,000
1,500
7,500
15,000

Salary Windsor

22,500
70,660
Share of profits
Philips [75%]
Windsor [25%]

52,995
17,665
-70,660

(d)
Philips

Bal b/d
Interest on drawings
Drawings
- cash
- goods
Bal c/d
Bal b/d

6|Page

1,000
30,000
4,000
75,855
______
110,855

Current Accounts
Windsor

8,410
Bal b/d
875
Interest on capital
25,000
Salary
______
34,285
120

Profit share
Bal c/d
Bal b/d

Philips

51,860
6,000

Windsor

52,995
______
110,855
75,855

17,665
120
34,285

1,500
15,000

7 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 4 2004 Hong Kong (Code 3501) Model Answer to Question 5
(a)
Freehold premises
Motor vehicles
Office equipment
Stock
Debtors
Capital:
James (3/6)
Peter (2/6)
Anne (1/6)
Capital:

James
Anne

Dr

20,000

Cr

25,000
4,000
8,000
7,000

12,000
8,000
4,000
44,000
10,000

______
44,000
10,000

[*]

[*]

[*] Goodwill adjustment

James
Peter
Anne

Old

30,000
20,000
10,000

New

20,000
20,000
20,000

(b)

Any three reasonable suggestions

Fast processing of large volumes of data
Arithmetic errors avoided as computer undertakes calculations
Specific reports required by management can be easily generated

(c)

Any two reasonable suggestions

Complete omission of a transaction by operator
Transaction being entered more than once by operator
Incorrect preparation of an input document

7|Page

Net

10,000 Cr

10,000 Dr

8 Chapter 4 Accounting for Partnership

Series 2 2005 (Code 3501) MODEL ANSWER TO QUESTION 2
(a)
Revaluation Account

3,000
Capital Accounts:
2,200
Barry (2/3rds)
Charles (1/3rd)
4,598
9,798

Plant
Stock
Debtors
(b)

Goodwill
Weighting

3
18,000
2
42,000
1
3,000
6
63,000

26,000 - 20,000 = 6,000

41,000 - 20,000 = 21,000
23,000 - 20,000 = 3,000
(c)

Goodwill (contra)
Revaluation Account
Bal c/d

Barry

Charles

6,532
149,568

3,266
69,534

______
156,100

______
72,800

6,532
3,266
9,798

Goodwill therefore: 63,000 /6 x 3 = 31,500

Capital Accounts
David

10,500
Bal b/d
Goodwill (contra)
57,500
Plant
Office equipment
Stock
_____
Bank
68,000
Bal b/d

Barry

145,600
10,500

Charles

72,800

______
156,100
149,568

_____
72,800
69,534

(d)
Barry, Charles and David
Balance Sheet at 1 March 2005
Fixed Assets
Plant
Office equipment
Current Assets
Stock
Debtors
Bank

(60,000 + 10,000)
(25,000 + 8,000)
(88,000 + 20,000)
(12,400 + 30,000)

Creditors: amounts due within one year

Creditors
Net Current Assets
Represented By:
Capital Accounts:
Barry
Charles
David

8|Page

70,000
33,000
103,000
108,000
80,002
42,400
230,402
56,800
173,602
276,602
149,568
69,534
57,500
276,602

David

10,000
8,000
20,000
30,000
68,000
57,500

9 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 4 2005 MODEL ANSWER TO QUESTION 2
Syllabus Topic 2: Preparation of accounting statements and data (2.3)
(a)
Existing
Adjustment
Calculation
Wong
60%
Less 20%
12
Lee
40%
Less 20%
8
Chow
nil
Add 20%
20
(b)
Wong
Lee

Capital balances b/fwd

60,000
40,000
Capital introduced
Goodwill (old)** (3:2)
120,000
80,000
Goodwill (new) (12:8:5)
96,000
64,000
56,000
84,000
**40,000 x 5 = 200,000

Revised
48% 1
32%
20%
Chow

Fraction
2/25ths
8/25ths
5/25ths

100,000
40,000
60,000

(c) Syllabus Topic 2: Preparation of accounting statements and data (2.1)

Wong, Lee and Chow
Trading, Profit & Loss and Appropriation Accounts
for the year ended 30 June 2005

Sales
Opening stock
Purchases

781,170

72,000
465,910
537,910
81,800

Closing stock
Cost of sales
Gross profit
Discount received

456,110
325,060
2,000
327,060

Wages (197,700 + 12,000)

Insurance (8,000 700)
Discounts allowed
General operating costs
Bad debts
Rent
Depreciation ([50,000 24,400] x 20%)

209,700
7,300
3,500
52,000
1,940
10,000
5,120
289,560
37,500

Net profit

Net Profit b/d

Share of Profits
Wong
Lee
Chow

9 months
ended
31.03.05

3 months
ended
30.6.05

Total

16,875
11,250

4,500
3,000
1,875

21,375
14,250
1,875

37,500

37,500
(d) Syllabus Topic 2: Preparation of accounting statements and data (2.3)
Details
Wong
Lee
Chow
Details

Bal b/d
3,000
Bal b/d
Drawings
30,000
20,000
4,000 Profit share
Bal c/d
4,250
Bal c/d
33,000
24,250
4,000
Bal b/d

9|Page

11,625

2,125

Bal b/d

Wong

21,375
11,625
33,000

Lee

10,000
14,250
24,250
4,250

Chow

1,875
2,125
4,000

10 Chapter 4 Accounting for Partnership

Series 3 2006 Hong Kong (Code 3501) MODEL ANSWER TO QUESTION 2
(a)
Chow and Wong
Profit & Loss and Appropriation Account
For the six months ended 30 June 2005

Gross profit
Selling expenses
Administration expenses
Distribution expenses
Depreciation

(394,380 x 5%)
(10,000 x 6)

19,719
60,000
15,777
2,048
97,544
99,646
200
240
100,086

Net profit
Add interest on drawings: Chow
(10,000 x 4% x 50%)
Wong (12,000 x 4% x 50%)
Less:
Interest on capital: Chow
Wong
Salaries:
Chow
Wong

197,190

(35,000 x 6% x 50%)
(15,000 x 6% x 50%)
(18,000 x 50%)
(18,000 x 50%)

1,050
450
9,000
9,000
19,500
80,586

Profit share:

Chow
Wong

(2/3rds)
(I/3rd)

53,724
26,862
-80,586
0

(b)
Hong Kong Development Ltd
Profit & Loss and Appropriation Account
For the six months ended 31 December 2005

Gross profit
Directors salaries [(18,000 x 1.2 x 50%) + (18,000 x 1.25% x 50%)]
Selling expenses (507,060 x 10%) 50,706
Administration expenses (10,000 x 1.2 x 6)
Distribution expenses
Depreciation
Net profit
Less: proposed dividends (200,000 x 0.10)
Retained profit for the year
Workings:
Partnership Company
Sales
(901,440/16 x 7)
Cost of sales
(50%)
Gross profit
(50%)
Depreciation:
2001
50,000 x 20%
2002
10,000 x 80%
2003
8,000 x 80%
2004
6,400 x 80%
2005
5,120 x 80%

10 | P a g e

253,530

22,050
72,000
25,353
2,048
172,157
81,373
20,000
61,373

394,380
197,190
197,190
10,000
8,000
6,400
5,120
4,096

(901,440/16 x 9)

divided equally = 2,048

507,060
253,530
253,530

11 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 4 2006 Hong Kong (Code 3501) MODEL ANSWER TO QUESTION 5
(a)

Motor vehicles
Goodwill
Bal to partnership [R]

Hoi

1 18,000
1 228,000
1,284,000
1,530,000

Capital Accounts
Wei

1 16,000
Balance b/d
1 152,000
Goodwill
812,000
Revaluation
980,000

Hoi

1 1,300,000
1
200,000
1
30,000
1,530,000

Wei

1 800,000
1 180,000
980,000

(b)
Hoi and Wei
Balance Sheet at 1 January 2006
Fixed Assets
Land
Equipment (280 + 590 - 18 - 16)
Current Assets
Stock
Debtors
Prepayments

530,000
836,000
1,366,000

820,000
540,000
70,000
1,430,000

(380 + 440)
(290 + 250)
(40 + 30)

Current Liabilities
Creditors
(280 + 310)
Accruals
(30 + 20)
Overdraft
(420 - 300 - 180)

590,000
50,000
60,000
700,000

Net Current Assets

Capital
Hoi
Wei

730,000
2,096,000

1,284,000
812,000
2,096,000
Crediting the partners' accounts in their old profit sharing ratios with their shares in goodwill or asset revaluations
ensures that they are rewarded with the value that has accrued to them up to the date of the change

11 | P a g e

12 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 2 2003 Hong Kong (Code 3501) Model Answer to Question 6
(a) Initial workings
If net profit = 8% of sales, sales must equal:

If mark-up = 100%, gross profit margin must be:

100 = 600,000

100 = 50%

Gross profit therefore equals sales of 600,000 x 50% = 300,000

Cost of sales therefore equals sales of 600,000 - gross profit of 300,000 = 300,000
Chiolan and Yan
Profit & Loss and Appropriation Account
for the year ended 31 March 2003

Gross Profit
Less:
Administration costs (300,000 x 40%)
Selling costs (600,000 x 15%)
%
Loan interest (30,000
)

Other costs [R]

300,000

120,000
90,000
1,500
40,500
252,000
48,000

Net Profit
Less:
Salary - Yan
Interest on capital:
Chiolan (90,000 x 5%)
Yan (30,000 x 5%)

8,000
4,500
1,500
14,000
34,000

Divided:
Chiolan (34,000 x 60%)
Yan (34,000 x 40%),

20,400
13,600
-34,000

(b) Initial workings:

Revised Goodwill
2001
(34,000)
2002
36,000
2003
48,000

x
x
x

1
2
3
6

=
=
=

-34,000
72,000
144,000
180,000

x 4 = 120,000

To share between Chiolan and Yan = 120,000 - 36,000 = 84,000

60% Chiolan
50,400
40% Yan
33,600
Nan's share of goodwill
=
80,000 x 25% = 20,000
Nan's profit share therefore
=
20,000 equals one sixth
120,000
Revised profit share between Chiolan, Yan and Nan equals 3:2:1
Goodwill write-off therefore:

Chiolan one half

60,000
Yan one third
40,000
Nan one sixth
20,000

Revaluation Profit
New values:

Premises
Stock

100,000
40,000

Premises
Stock

80,000
50,000

140,000
Less Old Values:
Revaluation increase
Shared:

Details
Goodwill write-off
Balance c/d

130,000
10,000
60% Chiolan
40% Yan
C

60,000
86,400

146,400

12 | P a g e

6,000
4,000
Y

40,000
27,600

67,600

Capital Accounts
N
Details

20,000 Balance b/d

74,000 Goodwill increase
Revaluation profit
Bank
Motor vehicle
Equipment
94,000
Balance b/d

90,000
50,400
6,000

146,400
86,400

30,000
33,600
4,000

67,600
27,600

80,000
10,000
4,000
94,000
74,000

13 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 4 2003 Hong Kong (Code 3501) Model Answer to Question 1
(a)
Stock
Debtors
Profit share:
Lin Nan
Chen Min

Revaluation Account

3,000 Premises (120,000 - 85,000)

750
[80%]
[20%]

(b)

25,000
6,250
35,000

______
35,000

Capital Accounts
Chen Min

30,000 Bal b/d

9,550
Revaluation Account: Profit
125,450
81,250 Loan a/c
Goodwill contra
______
______ Current a/c
111,250
135,000
Bal b/d

Lin Nan

Goodwill contra
Current a/c
Bal c/d

(c)

30,000
______
135,000
125,450

(25,800 - 3,000)
(16,950 - 750)

6,300

Lin Nan
Chen Min

13 | P a g e

60,000
111,250
81,250

120,000
32,000
18,000
170,000

36,700
206,700
125,450
81,250
206,700

Goodwill working
Lin Nan
Chen Min

Chen Min

20,000
6,250
25,000

22,800
16,200
4,000
43,000

Current Liabilities
Creditors
Financed by:
Capital Accounts

Lin Nan

80,000
25,000

Lin Nan & Chen Min

Balance Sheet at 1 January 2003

Tangible Fixed Assets

Freehold property
Vehicles
Equipment
Current Assets
Stock
Debtors
Bank

35,000

Old Ratio

80,000
20,000

New Ratio

50,000
50,000

Dr

30,000

Cr

30,000

14 Chapter 4 Accounting for Partnership

Series 3 (Code 3501) 2000 Hong Kong Model Answer to Question 5
(a)

Fixed assets: cost

Stocks
Trade Debtors
Prepayments 18
Capital Viking
Saxon

Realisation Account
000
300
Fixed assets: depreciation
90
Accruals
223
Trade Creditors
Viking car
87
58
Norman Ltd: consideration (400 x 1.25)
776

( .6 x 145)
( .4 x 145)

000
100
25
141
10
500
776

(b)

Drawings
Interest drawings
(40 x .1 x .5)
Salary paid
Car
Norman Ltd shares
Bank

Capital Accounts - 000s

Viking
Saxon
40
40
Bal b/d
2
3
Salary

Viking
300
-

Saxon
100
20

(40 x .1 x .75)
10
300
65
417

10
200
--253

Interest - capital (300 x 05) (100 x.05)

Profit share(+)
Realisation
Bank

15
15
87
---417

5
10
58
60
253

(+) 60 20 15 5+ 2 + 3 = 25 in ratio 3:2

(c)

Balance b/d
Capital Saxon

14 | P a g e

Bank Account
000
5
60
Capital Viking
65

000
65
65

15 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 2 2004 Hong Kong (Code 3501) Model Answer to Question 2
(a)

Realisation Account

53,000
Bank - car sale
19,500
Creditors
16,300
Nanchen Ltd - purchase consideration
8,600
Bank
11,376
Nan (split of shares)
Chen (split of shares)
39,000
26,000
173,776

Premises
Equipment
Vehicles
Stock
Debtors
Profit on realisation
Nan (60%)
Chen (40%)

2,512
9,264
12,000
90,000
60,000
______
173,776

(b)

Realisation Account
Bank

Nan

90,000
5,250
95,250

Capital Accounts
Chen

60,000
Balance b/d
3,500
Realisation Account
63,500

Nan

56,250
39,000
95,250

Chen

37,500
26,000
63,500

(c)

Realisation account
Realisation account

Bank Account

2,512
Bal b/d
12,000
Nan
_____
Chen
14,512

5,762
5,250
3,500
14,512

(d)
Nanchen Ltd
Balance Sheet at 31 December 2003

Tangible fixed assets

Premises
Equipment
Vehicles

63,000
18,000
13,000
94,000

Intangible fixed assets

Goodwill [1]
Current assets
Stock
Debtors
Less: Provision

58,013
152,013
8,500
11,376
625
10,751
488,000
507,251

Bank [2]
Creditors: falling due within one year
Trade creditors
Net current assets

9,264
497,987
650,000

Capital and Reserves

Authorised Share Capital: 800,000 1 Ordinary Shares

800,000

Issued and Fully Paid: 650,000 1 Ordinary Shares [3]

[1] Goodwill
Purchase Price
Fixed assets at revised values
Stock (8,600 - 600 + [800 - 300])
Debtors (11,376 - 625)
Less: Trade creditors

650,000
650,000
162,000
94,000
8,500
10,751
113,251
9,264

103,987
58,013

[2] Bank 500,000 for shares issued - 12,000 for cash used in purchase of partnership
[3] Shares 500,000 initial issue + 150,000 used in purchase of partnership

15 | P a g e

16 Chapter 4 Accounting for Partnership

Accounting Level 3 Series 3 2002 Hong Kong (Code 3501) Model Answer to Question 1
(a)
Fixed Assets
Stock
Debtors
Bank: Creditors
Capital Accounts:
Michael
Cane

Realisation Account

61,500
18,500
12,200
8,200
80%
20%

15,840
3,960
120,200

(b)

Manacle Ltd
Preference shares
** Ordinary shares
Bank

100,000
8,200
12,000

Manacle Ltd
Creditors
Bank: Debtors

_______
120,200

Capital Accounts
Michael

Cane

15,000
64,000

5,000
16,000
14,960
35,960

79,000

Bal b/d
Current Accounts
Realisation Account
Bank

Michael

30,000
20,000
15,840
13,160
79,000

** Purchase price: 100,000 - 20,000 (Preference shares) = 80,000 value of Ordinary shares
(c)
Bank Account

Bal b/d
8,000
Loan account
Realisation Account:
Realisation Account:
Debtors
12,000
Creditors
Capital Account:
Capital Account:
Michael
13,160
Cane
33,160
(d)

35,960

10,000
8,200
14,960
33,160

Manacle Ltd
Balance Sheet at 1 January 2002

Fixed Assets
Tangible
Goodwill
Current Assets
Stock
Capital and Reserves
Share Capital: Authorised, Issued and Fully Paid
20,000 1 Preference shares
50,000 1 Ordinary shares
Reserve:
Share premium
Workings
Goodwill:
Purchase price 100,000 less assets taken over, 80,000 = 20,000
Share Premium:
Purchase price
100,000
Less: Preference shares at par
20,000
80,000
Less: Ordinary shares at par
50,000
Premium
30,000

16 | P a g e

Cane

10,000
22,000
3,960

61,500
20,000
81,500
18,500
100,000

20,000
50,000
70,000
30,000
100,000

17 Chapter 4 Accounting for Partnership

ACCOUNTING LEVEL 3 CODE 3012 MODEL ANSWER TO QUESTION 2
Issued Share Capital
The number of shares a company has issued.
(b) Number of shares received

(2 marks)
(i) Basso
$000
242
80
(16)
306

(ii) Carey
$000
191
80
(16)
255

306,000/0.75
= 408,000 shares

255,000/0.75
= 340,000 shares

150,000 /0.75

= 200,000 shares

Capital account
Surplus on land and buildings [(400 (300 60)) x 0.50]
Loss on stock (32 x 0.50)

(iii) Orr
(d)
Tangible Fixed assets
Land and buildings
Plant and machinery
Current assets
Stock
Debtor
Bank

BCO Balance Sheet at 1 January 2010

$000

(150 42)

Liabilities: Amount due within 1 year

Creditor
Net Current assets
Capital and reserves
Ordinary shares at $0.50 each
Share premium

17 | P a g e

400
55
455

(120 65)
(96 32)

(408 + 340 + 200) x 0.50]

(948 x 0.25)

$000

58
140
108
306
50
256
711
474
237
761