Neco Model Questions Vol1 2024 Financial Accounting Question 15

Three partners A, B and C share profits in the ratio 3:2:1. Their opening capital balances are A \(300,000\) Naira, B \(200,000\) Naira and C \(100,000\) Naira. Before admitting a new partner D, the partnership revalues its assets as follows:\n\n* Building cost \(500,000\) Naira, increased by 20%.\n* Equipment cost \(150,000\) Naira, decreased by 10%.\n\nThe net revaluation surplus is to be shared among the existing partners in the old profit‑sharing ratio. Goodwill is valued at three times the average of the partners' capital after the revaluation. D is admitted for cash equal to half of the goodwill value and will share future profits in the ratio 1:2:3:4 (A:B:C:D). After admission the partnership decides to retain 10% of the profit for reserves. Assume the profit for the year before retention is \(120,000\) Naira. Compute:\n\n(a) The total goodwill transferred to the existing partners,\n(b) The cash contributed by D,\n(c) The new capital balances of A, B, C and D after admission and after retaining 10% of profit (show amounts rounded to the nearest Naira).