Example B page 5

•Account Receivable
A) Account receivable taken through to the new partnership (name”Munna Bhai
Associals”)at historical cost of “$1500”

M) Why-keywords---legal entitlement/right

Take through $1500 those account receivable all on credits those customers
payment to credit business and purchase good or pay the survive on credit. So those
customers owe this credit money .These money are account receivable legal
entitlement, they should receive the money from the debtors.Customers owe the sale
trader for buying goods or service on credit. Now sale trader is a partner the
customers still must pay. Therefore, the partnership how the legal entitlement to
receive the $1500.

•Allowance for doubtful debts

A) The allowance for doubtful debts is adjusted from $250 to $300, which is the
difference between the historical cost of $1500 and the agreed value of “$1200”

M) Why-keywords---past experience
---not yet identified as had debts

This means the partner know who owe his money but there no all debtors pay the
money. For example, there are 3 people owe him money but only two people give
his money so remaining one is identified as debts. If the partner does not sure the
remaining one pay his money, but he has money so this cannot have identified as
debts yet. Not all customers will pay from past experience. These can not be
identified yet as bad debts so are not written off. The p is still hopeful that all debts
will be received.

•Agreed value
A) The agreed value of “$120” is the likely amount of cash to be received from the
Account receivable when they settle their debts.

M) Why-keywords---based on past experience

Based on past experience not all account receivable will pay. Therefore for moving
partnership customers owe $1500 they all need but $1500 is so high maybe they do
not want to pay so if $1200 maybe they want to pay it. It might get lead me to having
some liquidity issues. This means the the partnership needs collect more money
from their debtors, so they can pay to their supply bank.

Example c page 5

•Goodwill

A) The partner “Y stress” goodwill is the difference between the fair value of his
contribution of “$40000” and the agreed value of his net assets “$34450 (40000-
5550)”(Agreed business value-goodwill)
Y stress goodwill is therefore calculated to be $5550

M) Why-keywords---intangible asset
---future economic benefit on asset that have no physical presence
(explain this)
Goodwill is an intangible asset does not have physical presence and can not touch it,
but it has future economic benefit. Like Y stress is sold trader for number of years,
build up good reputation has an established loyal customers .

E) The consequence for partnership is by having a partner who has good reputation.
Loyal customers mean on the first day of the partnership were be immediately
profitable.
From day one will have immediately profitable. It is the future economic benefit
casues by goodwill.

Part A Q3

•Absence of a partnership agreement. Ie. there is no

partnership agreement.
Example page 38 N Carter $60000
B Gates $ 30000 Net profit $55000
 A) In the absence of a partnership agreement the total net profit of “$55000” for
“carter and gates partnership” is shared equally amongst the partners as no
profit sharing clauses have been written in a partnership agreement. This
means that both “carter” and “gates” both receive “$27500” (profit/2) each as
their share of profit.

M) Why-keywords---partnership Act 1908---p agreement

No profit sharing clause

If there is no partnership agreement the law comes into effect. The law is the
partnership act 1908.I f there is no profit sharing clause like interest on capital salary
interest on current and interest on drawings so the profit has to be 50 -50.

E) cater $60000 gates $30000

If the profit sharing clause does not recognize each different contribution to the
partnership. For example cater given twice much capital therefore because he has
given a lot more capital so he has great rest . cater rewards as interest on capital.
he reward a great share profit. More capital means greater rest. Greater shared of
profit Ashe accepts the greater share of but not allowed as no partnership
agreement.