Self-test Mike and Jean are partners in a gift business. The agreement they have is that profits are shared equally, but interest is paid on their capital accounts.

The trial balance of Mike and Jean for the year ended 31 December 2009 is as follows:

Fittings and fixtures 22,000 Accumulated depreciation 6,600 Debtors 38,700 Creditors 21,400 Bank 6,512 Stock 93,460 Purchases 195,220 Sales 298,715 General expenses 6,448 Salaries and wages 43,309 Bad debts 1,912 Provision for doubtful debts 900 Capital account – Mike 67,000 Capital account – Jean 41,000 Current account – Mike 3,144 Current account – Jean 1,102 Drawings – Mike 15,800 Drawings – Jean 16,500 439,861 439,861 The following adjustments have still to be made:

(i) Closing stock of £132,880.

(ii) Partnership salary to Mike £2,600.

(iii) Interest on drawings, Mike £460 and Jean £340.

(iv) Interest on capital at 10 per cent p.a.

You are required to prepare the profit and loss account and balance sheet for the year.