A2 accounting topical past papers and theory book

A2 Accounts Assignment
Mergers Assignment

, 6

Question 3

Source A3

Ahmed and Omar were sole traders in the same trade. They decided to merge their businesses to form
a partnership on 1 January 2020.

The books of account of Ahmed and Omar had the following balances of assets and liabilities at
1 January 2020.

Ahmed Omar
$ $
Plant and equipment 203 000 134 000
Motor vehicles 74 000 46 000
Inventories 51 000 36 500
Cash at bank Nil 28 600
Trade receivables 59 700 53 800
Trade payables 42 500 34 100
Bank overdraft 8 900 Nil

The following was also agreed.

1 The values of each sole trader’s business at 1 January 2020 were:

$
Ahmed 400 000
Omar 300 000

2 The partnership would take over all the assets and liabilities of both businesses at the
following values:

Ahmed Omar
$ $
Plant and equipment 230 000 144 000
Motor vehicles 71 000 40 000
Inventories 52 500 34 400
Cash at bank Nil 28 600
Trade receivables 58 000 52 000
Trade payables 42 500 34 100
Bank overdraft 8 900 Nil

Answer the following questions in the Question Paper. Questions are printed here for reference
only.

(a) Calculate the value of goodwill of each of Ahmed’s and Omar’s businesses. [6]

(b) Prepare the statement of financial position of the partnership at 1 January 2020 if goodwill is
included. [6]

Additional information

The profit and loss sharing ratio between Ahmed and Omar is 3:2.

Both partners also agreed that goodwill would not be maintained in the books of account.


© UCLES 2020 9706/32/INSERT/F/M/20