IGCSE Accounting Paper-2: Specimen Questions with Answers 71 - 73 of 189

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Passage

Singer and Dancer are partners sharing profit in the ratio of 3: 2. Their balance sheet on 31st March 2014 was as follows:

Singer and Dancer Are Partners Sharing Profit in the Ratio
LiabilitiesAmountAssetsAmount
Singer՚s Capital32500Bank40500
Dancer՚s Capital11500Stock7500
Creditors48000Debtors - 21500

Less: Provision for doubtful debts - 500

21000
Reserve fund13500Fixed Assets36500
105500105500

On 31st March 2014, they decided to dissolve the firm and the following information was provided by them: (i) Debtors were realized at a discount of 5 % ; (ii) Stock at £ 7000; (iii) Fixed assets at £ 42000; (iv) realization expenses were £ 1500; (v) All the creditors were fully paid.

Question 71 (3 of 5 Based on Passage)

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Short Answer▾

What will be the take away amount of Singer and Dancer after the firm՚s dissolved?

Explanation

The take away capital of Singer and Dancer upon dissolution of the firm is £ 42355 and £ 18070.

Capital Accounts of Singer and Dancer
ParticularsSingerDancerParticularsSingerDancer
To bank A/c4235518070By balance b/d3250011500
Reserve fund81005400
Realization profit17551170
42355180704235518070

Reserve fund = 13500 in 3: 2 = 8100 and 5400

Question 72 (4 of 5 Based on Passage)

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Short Answer▾

What are the reasons for dissolution of a firm?

Explanation

Dissolution of the firm may be due to any of the following reasons:

(i) Dissolution by agreement – mutually agreement between the partners

(ii) Compulsory dissolution – When one or all partners become insolvent.

(iii) On the event of contingencies

(iv) Dissolution by notice

(v) Dissolution by court

Question 73 (5 of 5 Based on Passage)

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Short Answer▾

Will Singer and Dancer earn a profit or incur a loss, after the realization of their assets and paying their creditors in full?

Explanation

Realization Account in the Books of Singer and Dancer as on 31st March 2014
ParticularsAmountAmountParticularsAmountAmount
Assets transferredProvision for doubtful debts500
Stock7500Creditors48000
Debtors21500Bank
Fixed assets36500Debtors20425
Bank expensesstock7000
Creditors48000Fixed assets42000
Realization expenses1500
Profit transferred (Bal Fig)
Singer՚s capital1755
Dancer՚s Capital11702925
117425117425

Profit = 2925

Singer = ; Dancer =

Debtors = 21500 – 5 %= 21500 – 1075 = 20425

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