Reference no: EM133105750

Question - A partnership was formed by Salmah, Sally, and Selvi in 1999. The partnership provides medical services to underprivileged individuals in Malaysia. Each partner shares the profits or losses on the ratio of 5:3:2, respectively. The following balances were extracted from the partnership books of account as at 30 November 2021.

	RM	RM
Capital account, beginning balance
Salmah		100,000
Sally		85,000
Selvi		70,000
Current account, beginning balance
Salmah		70,000
Sally		50,000
Selvi		47,000
Building	400,000
Motor vehicle	180,000
Furniture and fittings	100,000
Accumulated depreciation-building		160,000
Accumulated depreciation-motor vehicle		120,000
Accumulated depreciation-furniture and fittings		80,000
Supplies	72,500
Accounts receivable (net)	35,000
Cash and bank	80,000
Accounts payable		8,000
Net profit for the year		77,500
	867,500	867,500

Additional information:

1. The salary for Sally is RM1,000 per month.

2. The partners are entitled to a 10% interest per annum on capital account balances.

3. Selvi withdrew RM1,000 cash in the partnership.

4. Sally resigned and retired from the partnership on 1 June 2021. Upon her retirement, the building and motor vehicle were revalued at RM30,000 and RM4,000 above their carrying amounts, respectively.

5. Due to her retirement, Sally's current account is to be transferred to her capital account. The partnership agreed to pay the amount due to Sally, except for RM40,000, which remains as a loan to the partnership.

6. Goodwill was valued at three years' purchase of the average profit for the last four years. The profit for the previous four years was as follows:

	RM
30 November 2020	62,000
30 November 2019	68,000
30 November 2018	58,000
30 November 2017	50,000

Following Sally's retirement, Salmah and Selvi decided to continue with the same partnership with two member-partners. While Salmah agreed to pay RM100,000 into the partnership as an additional capital contribution, Selvi consented to invest an additional RM50,000. Each of them decided to pay for the goodwill based on the new profit-sharing ratio. The entry was not recorded in books upon the formation of the new partnership.

The new partnership profit-sharing ratio is 2:1.

The net profit for the year is deemed to have been earned evenly throughout the year.

Required -

1. Compute the goodwill for the partnership and prepare the goodwill account.

2. Prepare the partner's capital and current account as of 1 June 2021 in a columnar form.

3. If Salmah and Selvi dissolve the partnership, explain in what order the partnership net assets must be distributed.