10.2 Priestley and Judge are partners, sharing profits and losses in the ratio 3 : 2. The following is the trial balance in the partnership books at 31 December 20X6.

£ £

Capital account at 1.1.X6: Priestley 123,000 Judge 99,000 Drawings: Priestley 27,000 Judge 18,000 Provision for doubtful debts 3,600 Purchases 762,300 Sales 988,950 Vans, at cost 87,000 Fittings, at cost 18,000 Accumulated depreciation: vans 44,400 fittings 8,550 Stock at 1.1.X6 130,200 Office expenses 48,000 Motor vehicle expenses 29,700 Motor car, at cost 1.1X6 12,000 Debtors 91,500 Creditors 31,500 Bank 3,750 Wages and salaries 55,200 Insurance 4,650 Discounts allowed 19,200

£1,302,750

£1,302,750 The following additional information is available:

1. Stock at 31 December 20X6 was valued at £197,850.

2. Depreciation is to be provided on the fittings at the rate of 10 per cent of the reducing balance and on the vans and car at the rate of 20 per cent of the reducing balance. Priestley is to accept personally £3,000 of the vehicle expenses and one half of the depreciation charge on the car.

3. No rent has been paid on the business premises during the year because of a dispute with the landlord. The rent agreement provides for payment of rent of £6,960 a year.

4. The partners are entitled to interest on capital of 10 per cent a year.

5. Bad debts of £1,500 are to be written off and the provision for doubtful debts to be adjusted to 2.5 per cent of the remaining debtors.

6. Insurance of £525 has been paid in advance.

7. Wages of £2,775 were outstanding at 31 December 20X6.

8. Bank charges of £525 appear in the bank statement but have not yet been entered into the partnership bank account.

Required:

Prepare the trading, profit and loss account for the year ended 31 December 20X6 and the balance sheet as at that date.