CAPE Accounting Unit 1 · 2012 · Paper 2 · Question 2(b)(i)

Kendal and Kwame share profits and losses equally in a publishing business. They admit Janet, who contributes 80 000 for expansion, with future profits shared equally among Kendal, Kwame, and Janet. Prior to admission, their balance sheet shows total net assets of 216 000 (Kwame capital 120 000, Kendal capital 96 000). Revaluation of assets reveals goodwill valued at 18 000, Buildings at 200 000, Plant and Machinery at $16 000. Inventory and Accounts Receivable remain at book value.

Prepare the Capital Adjustment Account showing charges to the Plant and Machinery Account, Building Account, Goodwill, and the Partners' Capital Accounts immediately prior to Janet's admission.