1. Billy and Erica are partners sharing profits and losses in the ratio of 3:2 respectively. Their Statement of financial position as at March 31, 2016 was as follows:

Billy and Erica

Statement of Financial Position as at 31 March 2016

 

	$	$
Non-current assets
Buildings		65 000
Furniture		15 000
Machinery		13 000
		93 000
Inventory	30 000
Accounts receivable	19 000
Cash at bank	23 000
Cash in hand	3 000
	75 000
Less; Current liabilities
Accounts payable	28 000
		47 000
		140 000
Financed by:
Capitals:
Billy		70 000
Erica		70 000
		140 000

On that date, they admit Devon into the partnership for 1/3 share of the profits on the following terms:

1. Furniture and inventory are to decrease by 10%.
2. Building is appreciated by $20 000.
3. 5% provision is to be created for doubtful debts.
4. Devon is to bring in $50 000 as his capital and $30 000 as goodwill.

Prepare:

1. the revaluation account (7 marks)

1. the partners’ capital account (10 marks)

1. the Statement of Financial Position of the new firm. (8 marks)