1 Lincoln and Thomas are engineers who practice in partnership under the name Lincoln and Thomas Associates & Company. The firm has been in operation for a number of years and is located at 75 Duncan Street. The partners share profit and losses in the ratio of 5:3. Lincoln, the senior partner, provided the following information from the partnership. records with notes for the year ended December 31, 2020: According to the Profit or Loss statement, the net profit from the partnership for the year ended December 31, 2020 was $95,600. (1) Interest is to be charged on drawings at the agreed rate. () Interest is to be paid on capital balances at the agreed rate. () Lincoln is to be allowed a salary of $20,000 per year. (iv) Thomas is to be allowed a salary of $16,000 per year. (v) The partners' capital account balances throughout the year were: Lincoln Thomas $200,000 $120,000 (vi) The balances on the partners' current accounts as at January 2020 were: Lincoln Thomas $16,000 CR $12,000 DR (vi) During the year ended 31 December 2020 the following drawings were made: Lincoln $38,000 on July 1, 2020 Thomas $50,000 on October 1, 2020 The following notes are relevant to the preparation of the partnership accounts for the year ended December 31, 2020. Lincoln also attached the following abstract taken from the current Partnership Agreement: The rate of interest, if any, to be paid on capital shall be 4% per annum. The rate of interest, if any, to be charged on partners drawings shall be 5%. Salaries are to be paid to any partner as agreed and such annual sums shall be paid, provided the partner works in the business for a full year, otherwise payment shall be made pro-rata. Law Office Management Accounting and Tec Pa At the end of each accounting year the current account balances shall be cleared and such amounts are to be paid on the first day of the following month, provided the partner does not exercise an option to carry such funds forward to the new accounting year. Performance related bonus shall be paid at the rate of 6% of the partnership net profit and shall be deducted before sharing the balance of profits. Thomas exercised his option to take a sabbatical and left the practice July 1, 2020, for six months. Thomas is not expected to return to work before January 2, 2021. At a performance evaluation meeting held December 30, 2020, it was agreed that Lincoln met the quantifiable objective of increasing fee income by 10% and is therefore entitled to be paid the performance related bonus on or before December 31, 2021. Lincoln received payment of the bonus on December 30, 2020. Required: (a) Prepare the appropriation account for the year ended December 31, 2020. Prepare the current accounts for each partner as at December 31, 2020. (b) (c) Draft a brief memorandum to Lincoln and Thomas explaining the balance on their current account and advise them of their options with regard to the balance on the account. QUESTION 2 Beka Plc is a limited liability company providing engineering services. The company has been in operation for a number of years and has produced the following Trial Balance for the year ended December 31, 2020: Debit Credit ($) (5) Fee Income received 270,000.00 Commission received 280,000.00 Interest Income 120,000.00 Wages and salaries 152,500.00 Stationery and postage 72,250.00 Utility charges 124,240.00 Repairs and maintenance 53,900.00 Professional fees 12,800.00 Rental income 220,000.00 Insurance 28,000.00 Interest expense 24,000.00 General expenses 42,000.00 Directors fees 60,000.00 Receivables 220,000.00 Payables 76,500.00 6% Loan (2028) 300,000.00 5% Loan-payable in 6 months 100,000.00 Cash at bank 162,800.00 Cash in hand 32,210.00 Share Capital ($1.00) 300,000.00 Staff Welfare 44,200.00 Office equipment 467,000.00 Provision for depreciation 93,400.00 Motor vehicles 480,000.00 Provision for depreciation 96,000.00 Retained profits/earnings 120,000.00 1.975,900.00 1.975.900.00 Monday De Retained profits/earnings 120,000.00 1.975.900.00 1.975.900.00 Notes: (1) (2) (3) Depreciation is to be charged at the following annual rates: Equipment 20% on cost Motor Vehicle 25% on cost Insurance is prepaid by $8,000. Utility bills received after close of the trial balance due and payable on January 1, 2021 amounting to $7,000. (4) Interest on the 5% loan although due was not paid. (5) The corporation tax charge on profits is estimated to be $12.000. Required: 1. 2. (a) Prepare the Statement of Profit or Loss for the year ended December 31, 2020 and a statement of financial position as at December 31, 2020. (b) The shareholders of Beka Plc asked the directors to declare a dividend of 15 cents per share. Calculate the total dividend that would be payable based on the shareholders' request and advise the directors if there is sufficient profit to pay the dividend. (Do not adjust the profits or include in the statement of financial position). The directors received a letter from a concemed shareholder, Loma Jones, who wanted to know, having reviewed the financial statements, if she is responsible for the payment of the corporation taxes shown in the profit or loss statement and, if so, what amount