QUESTION 4 (12 marks)(14 minutes) Thula, Mabota, and Futhi are in a partnership, trading as ThulaMF Tech Academy. The partnership was established solely to provide coding bootcamps and digital skills training camps to young and aspiring tech entrepreneurs, with a particular focus on youth from previously disadvantaged communities. Their programmes cover a wide range of skills—from basic digital literacy to full-stack web development and mobile app creation. Thula, Mabota, and Futhi contributed capital in equal amounts to start the business, but they agreed to share profits and losses in the ratio of 5:3:2, respectively, reflecting their ongoing involvement and responsibilities in the business. Thula leads the curriculum design and oversees instructional quality, Mabota manages strategic partnerships and corporate training contracts, while Futhi is responsible for community outreach and learner support services. As of 31 March 2025, the following balances appeared in the accounting records of the partnership, reflecting its financial position after a year of operations and several successful training cohorts. Balances as at 31 March 2025: Capital: Thula................................................................................................... 260 000 Capital: Mabota................................................................................................. 156 000 Capital: Futhi.................................................................................................... 104 000 Current account: Thula (1 April 2024) (Cr)........................................................ 4 000 Current account: Mabota (1 April 2024) (Dr)....................................................... 6 000 Current account: Futhi (1 April 2024) (Cr).......................................................... 5 000 Goodwill ............................................................................................................ 30 000 Land and buildings at cost ............................................................................... 375 000 Motor vehicles at cost ....................................................................................... 160 000 Accumulated depreciation: Motor vehicles.......................................................... 40 000 Bank (Dr)............................................................................................................ 54 150 Trade payables control....................................................................................... 56 150 As demand for traditional business administration skills began to decline, ThulaMF Tech Academy noticed a significant drop in enrolments for their entry-level coding bootcamps, particularly in foundational "data capture and administration" courses, which were no longer seen as competitive in the modern digital job market. This drastic shrink in subscription rates led to a substantial loss of income. After careful consideration, the partners decided to dissolve the partnership piecemeal, effective 1 April 2025, in order to minimise ongoing costs. They agreed that as cash became available from the liquidation of business assets, the proceeds would be distributed among them in such a way that no partner would be required to refund any money to the partnership. On 10 April 2025, the company's branded transport vehicles used for outreach and pop-up training labs were auctioned for R130,000 in cash. On the same day, the partners received and accepted an offer of R440,000 for the training campus property (land and buildings). FAC1601 MAY 2025 REQUIRED: Record the liquidation of ThulaMF Tech Academy in columnar format according to the loss-absorption capacity method from 31 March to 10 April 2025 (12 Marks) Please note: Round off all amounts to the nearest Rand. All calculations MUST be shown.
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The cost of motor vehicles is R160,000, and the accumulated depreciation is R40,000. \[ \text{Book Value of Motor Vehicles} = \text{Cost} - \text{Accumulated Depreciation} = 160,000 - 40,000 = 120,000 \] Show more…
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Problem #14: Lump-Sum Liquidation: Comprehensive Problem Dulay, Sandoval, and Ramel are partners in a law firm. They share profits and losses in a 5:3:2 ratio. The partnership agreement provided for annual salaries of P400,000, P350,000, and P300,000, respectively, interest of 12% on their Jan 1 capital balances, and any balance to be divided in the profit and loss ratio. The partners' capital balances as of Jan 1, 2018, were Dulay, P1,200,000; Sandoval, P750,000; and Ramel, P500,000. No additional investments were made during the year. Profit for 2018 was P1,600,000. Partners' withdrawals for the year were as follows: Dulay, P500,000; Sandoval, P400,000; and Ramel, P350,000. On Mar 4, 2019, the partners decided to liquidate their law firm. On that date, the firm has a cash balance of P460,000, non-cash assets of P2,740,000, and liabilities of P100,000. No additional investments or withdrawals have been made in 2019. Between Mar 5 and Mar 31, the non-cash assets are sold for P2,900,000, and the gain is divided in the profit and loss ratio. The liabilities are paid, and the remaining cash is then distributed to the partners. Required: 1. Prepare the bottom portion of the statement of comprehensive income for the year ended Dec 31, 2018, showing the manner of allocation of the profit. 2. Prepare the journal entry to close the income summary against the partners' capital accounts as at Dec 31, 2018. 3. Prepare the statement of changes in partners' equity for the year ended Dec 31, 2018. 4. Prepare the journal entries as at Mar 31, 2019, for the following: a. Sale of the non-cash assets. b. Distribution of gain on realization. c. Payment of liabilities. d. Distribution of remaining cash to the partners. 5. Prepare a statement of liquidation for the period Mar 5 to Mar 31, 2019.
Anand J.
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