Exam (elaborations)

FAC1601 ASSESMENT 2 SEMESTER 2 2024 If the remaining partners do not wish to sell a retiring partner’s share, they can use partnership funds to settle the retiring partner’s interest. True False Question 10 Where are pro ts or losses from the liquid

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Course
Financial Accounting and Reporting (FAC1601)

Institution
University Of South Africa (Unisa)

Book
FAC1601

FAC1601 ASSESMENT 2 SEMESTER 2 2024 If the remaining partners do not wish to sell a retiring partner’s share, they can use partnership funds to settle the retiring partner’s interest. True False Question 10 Where are pro ts or losses from the liquidation of partnership assets record...

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fac1601 assesment 2 semester 2 2024 if the remai

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,9/16/24, 9:31 PM Assessment 2 (page 1 of 18)

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When a new partner is admitted to a partnership, the old partnership
automatically continues without any changes to the ownership structure.

True

False

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,9/16/24, 9:31 PM Assessment 2 (page 2 of 18)

FAC1601-24-S2  Welcome Message  Assessment 2

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Trading under the name Lehumo Bricks, Refentse and Boitshepo are partners in
this brick manufacturing company. Over the years, Lehumo Bricks has
established itself as a reputable supplier of high-quality bricks used in various
construction projects, from residential homes to large commercial buildings.
The business has been profitable, with Refentse and Boitshepo sharing profits
and losses equally, reflecting their initial capital investments and contributions
to the partnership.
However, after years of operating in the competitive construction materials
industry, the partners decided to liquidate the business. Their decision was
influenced by a combination of factors, including changes in market demand,
increasing production costs, and their desire to pursue other ventures.

Having carefully evaluated offers for key assets, particularly the land, the
building, manufacturing equipment and inventory on hand, they decided to
accept the most favourable ones for the sale of the land, inventory and
equipment. With this decision in place, they planned to initiate the
simultaneous liquidation of the partnership on 1 June 2024.

Before any liquidation entries were recorded, they prepared a final trial balance
to summarise the financial position of the business.
EXTRACT OF TRIAL BALANCE AS AT 1 JUNE 2024
R

Equipment at carrying amount R290,000
Long-term loan -R968,500
Land and building at carrying amount R792,000
Inventory R256,000
Capital – Refentse -R268,900
Capital – Boitshepo -R285,900
Current account – Refentse (dr) R41,600
Current account – Boitshepo (dr) R24,000
Bank R119,700

On 1 June 2024, a series of financial transactions took place to finalise the sale
of the business’s assets and settle its liabilities. Below is a summary of the key
transactions that occurred during the liquidation:

1. The land and buildings, which had been integral to Lehumo Bricks'
manufacturing operations, were sold for a cash amount of R855 000.
2. Boitshepo, one of the partners, took over certain brick-making equipment
with a carrying amount of R87 600. While Boitshepo did not pay for the
equipment immediately, the partners agreed on a cash value of R74 000
for this transaction.
3. The remaining brick-making equipment was sold to an external buyer at a
carrying value in cash.
4. The costs associated with the liquidation process amounted to R54 000.
These costs included legal fees, administrative expenses, and other
charges incurred during the winding-up of the business.
5. The inventory of bricks and raw materials was sold for R210 000. The
sale of these finished goods and materials added substantial cash to the

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Exam (elaborations)

FAC1601 ASSESMENT 2 SEMESTER 2 2024 If the remaining partners do not wish to sell a retiring partner’s share, they can use partnership funds to settle the retiring partner’s interest. True False Question 10 Where are pro ts or losses from the liquid

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