C hapter 13: Amalgamation of sole traders‘

businesses
Contents of chapter
This chapter covers the accounting problems that arise when sole traders amalgamate to form a partnership.

Notes for teachers

The asset values for the new balance sheet are mostly the new agreed values, and not the old balance
1
sheet values.

An increase in values also increases the capital of the sole trader concerned. A reduction in values will
2
reduce the sole trader’s capital.

118
Answers to MCQs and exercises
13.1 B 13.2 C

13.3
(a) Calculation of opening capital:
Shing Yau
$ $ $ $
Balance as per original balance sheets 14,895 19,829
Less Reduction in values:
Motor vehicles 2,000 2,550
Office equipment 200 210
Debtors 220 2,420 523 3,283
12,475 16,546

(b) L Shing and P Yau

Balance Sheet as at 1 January 20X2
Fixed Assets $ $ $
Motor vehicles ($8,000 + $10,200) 18,200
Office equipment ($880 + $2,000) 2,880
21,080
Current Assets
Stock ($2,600 + $3,150) 5,750
Debtors ($4,100 – $220) + ($6,240 – $523) 9,597
Cash at bank ($930 + $1,405) 2,335 17,682
Less Current Liabilities
Creditors ($3,815 + $5,926) 9,741
Net current assets 7,941
29,021
Financed by:
Capital
L Shing 12,475
P Yau 16,546
29,021

13.4X
(a) Partners’ Opening Capitals as at 1 July 20X5
M Au C Tam
$ $
Machinery 17,000 9,000
Furniture and fittings 2,500 1,050
Stock 5,150 1,300
Debtors 4,200 5,500
Bank 2,100 —
30,950 16,850
Less Creditors 6,300 4,125
24,650 12,725
Therefore, capital for the partnership is $24,650 + $12,725 = $37,375

119
 (b) M Au and C Tam
Balance Sheet as at 1 July 20X5
Fixed Assets $ $ $
Machinery ($17,000 + $9,000) 26,000
Furniture and fittings ($2,500 + $1,050) 3,550
29,550
Current Assets
Stock ($5,150 + $1,300) 6,450
Debtors ($4,200 + $5,970 – $470) 9,700
Bank 2,100 18,250

Less Current Liabilities

Creditors ($6,300 + $4,125) 10,425
Net current assets 7,825
37,375
Financed by:
Capital
M Au 24,650
C Tam 12,725
37,375

13.5X
(a) Samuel and Sammi
Journal
Date Particulars Dr Cr
20X5 $ $
July 1 Building 80,000
Fixtures 12,000
Furniture 7,500
Motor vehicles 8,000
Stock 10,600
Debtors 9,000
Bank ($4,350 + $60) 4,410
Creditors 4,120
Capital: Sammel 127,390
Introduction of Samuel’s capital 131,510 131,510

Building 50,000
Fixtures 8,000
Furniture 18,500
Motor vehicles 6,000
Stock 14,400
Debtors 7,000
Bank ($5,520 + $110) 5,630
Creditors 3,270
Capital: Sammi 106,260
Introduction of Sammi’s capital 109,530 109,530

120
(b) Balance Sheet as at 1 July 20X5
Fixed Assets $ $
Buildings ($80,000 + $50,000) 130,000
Fixtures ($12,000 + $8,000) 20,000
Furniture ($7,500 + $18,500) 26,000
Motor vehicles ($8,000 + $6,000) 14,000 190,000

Current Assets
Stock ($10,600 + $14,400) 25,000
Debtors ($9,000 + $7,000) 16,000
Bank ($4,410 + $5,630) 10,040
51,040
Less Current Liabilities
Creditors ($4,120 + $3,270) 7,390
Net current assets 43,650
233,650
Financed by
Capital: Samuel 127,390
Sammi 106,260
233,650

13.6
(a) Workings:
Opening capitals
Leung Chan
$ $
Car 10,000 —
Computer equipment 2,000 —
Furniture and fittings — 2,000
Office equipment — 1,500
Stock 3,200 6,700
Debtors 2,970 3,780
Bank 1,800 2,000
Cash 50 —
20,020 15,980
Less Creditors 3,940 6,500
16,080 9,480

Leung and Chan

The Journal
Date Particulars Dr Cr
20X2 $ $
Jan 1 Car 10,000
Computer equipment 2,000
Furniture and fittings 2,000
Office equipment 1,500
Stock ($3,200 + $6,700) 9,900
Debtors ($3,420 – $450) + ($4,100 – $320) 6,750
Bank ($1,800 + $2,000) 3,800
Cash 50
Creditors ($3,940 + $6,500) 10,440
Capital
Leung 16,080
Chan 9,480
Being assets and liabilities to start the partnership. 36,000 36,000

121
 (b) Leung and Chan
Balance Sheet as at 1 January 20X2
Fixed Assets $ $ $
Furniture and fittings 2,000
Office equipment 1,500
Computer equipment 2,000
Car 10,000
15,500
Current Assets
Stock 9,900
Debtors 6,750
Bank 3,800
Cash 50 20,500
Less Current Liabilities
Creditors 10,440
Net current assets 10,060
25,560
Financed by:
Capital
Leung 16,080
Chan 9,480
25,560

13.7X
(a) Partners’ Opening Capitals as at 1 April 20X1
P Ying H Poon
$ $
Machinery 30,000 9,000
Motor vehicles 15,000 7,500
Office equipment — 3,000
Stock 7,200 4,000
Debtors (P Ying: $3,500 – $245; H Poon: $4,170 – $670) 3,255 3,500
Cash at bank — 3,050
Cash in hand 150 50
55,605 30,100
Less Creditors 4,120 5,690
51,485 24,410

Therefore, the opening capital for the partnership is $51,485 + $24,410 = $75,895

(b) P Ying and H Poon

The Journal
Date Particulars Dr Cr
20X1 $ $
Apr 1 Machinery ($30,000 + $9,000) 39,000
Motor vehicles ($15,000 + $7,500) 22,500
Office equipment 3,000
Stock ($7,200 + $4,000) 11,200
Debtors ($3,255 + $3,500) 6,755
Bank 3,050
Cash 200
Creditors ($4,120 + $5,690) 9,810
Capitals
P Ying 51,485
H Poon 24,410
Being assets and liabilities to start the partnership. 85,705 85,705

122
(c) P Ying and H Poon
Balance Sheet as at 1 April 20X1
Fixed Assets $ $ $
Machinery 39,000
Motor vehicles 22,500
Office equipment 3,000
64,500
Current Assets
Stock 11,200
Debtors 6,755
Cash at bank 3,050
Cash in hand 200 21,205

Less Current Liabilities

Creditors 9,810
Net current assets 11,395
75,895
Financed by:
Capital
P Ying 51,485
H Poon 24,410
75,895

13.8X
(i) Mary and Paul
Journal
Date Particulars Dr Cr
20X5 $ $
Jan 1 Office equipment 6,000
Stock 22,400
Debtors ($20,700 – $600) 20,100
Bank 9,600
Creditors 10,600
Capital: Mary 47,500

Mary’s capital contribution to the new partnership.

Office equipment 6,500

Delivery van 11,000
Stock 19,700
Debtors ($17,300 – $700) 16,600
Cash 400
Creditors 9,500
Capital: Paul 44,700

Paul’s capital contribution to the new partnership.

123
 (ii) Mary and Paul
Balance Sheet as at 1 January 20X5
$ $ $
Fixed Assets
Office equipment ($6,000 + $6,500) 12,500
Delivery van 11,000 23,500
Current Assets
Stock ($22,400 + $19,700) 42,100
Debtors ($20,100 + $16,600) 36,700
Bank 9,600
Cash 400 88,800
Less Current Liabilities
Trade creditors ($10,600 + $9,500) 20,100
Net current assets 68,700
92,200
Financed by:
Capital
Mary 47,500
Paul 44,700 92,200

124