Gregory and Simpson share profits in a proportion of 60:40. Gregory is entitled to a salary allowance of $60 000 p.a., and Simpson is entitled to $50 000 p.a. Capitals are fixed at Gregory $72 000 and Simpson $48 000. Interest is to be calculated on partners’ capital, advances, and drawings in excess of salary at 8% p.a. The trial balance after the determination of profit for the 6‐month period is shown below.

Gregory had withdrawn $12 000 cash on 1 April; Simpson’s cash drawings included $24 000 on 1 March and $12 000 on 1 May.

Required

(a) Prepare the Profit Distribution account for 6 months ended 30 June 2019.

(b) Prepare the Retained Earnings accounts for each partner at 30 June 2019.

(c) Prepare a balance sheet as at 30 June 2019.

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Gregory, Capital Simpson, Capital Gregory, Advance (Balance at 1/1/2019) Gregory, Retained earnings Simpson, Retained earnings GREGORY AND SIMPSON Trial Balance as at 30 June 2019 Debit Credit $ 72000 48000 $ 22.000 16 000 Gregory, Salary Simpson, Salary Cash at bank Accounts receivable Plant and equipment Accumulated depreciation plant and equipment 30 000 25 000 3200 22 000 106000 Inventory Accounts payable Profit or loss summary 24000 47 800 32 000 18400 46000 $256 200 $256200