A Answer BOTH questions in this section. 1 Borin and Priti are in partnership. The partnership agreement states that: interest is paid on capital at the rate of 5% per annum interest is charged on drawings at the rate of 10% per annum on balances at 31 December 2020 partnership salaries are paid per year: Borin 9 000, Priti 6 000 the profit sharing ratio: Borin three fifths, Priti two fifths. Balances in the books at 31 December 2020 were Capital accounts: Borin Priti Borin Priti Current accounts - 1 January 2020 Drawings: Borin 40 000 50 000 200 Dr 2500 Cr 4 000 5.000 Additional information at 31 December 2020. (1) Inventory 41 000 (2) Insurance includes the annual insurance renewal of 2 000 paid on 1 April 2020. (3) Rent payable of 3 000 was prepaid. (4) Rent receivable of 2 000 was owed. (5) The 8% bank loan was taken out on 1 January 2020 and the capital is repayable by five equal instalments on 1 January each year, starting in 2021. (6) Wages and salaries included partnership salaries paid during the year to Borin 9 000 and to Priti 6 000 (7) No entries had been made in the books for a cheque, 3 800 paid to Moween, for goods purchased on credit. (8) Depreciation is charged at the rate of: 20% on motor vehicles using the reducing balance method 15% on office fixtures using the straight line method. (9) The allowance for irrecoverable debts is to be maintained at 4%. Required Priti (a) Prepare the Statement of Profit or Loss and Other Comprehensive Income (including the appropriation of profit or loss) for the year ended 31 December 2020. Revenue 370 000 (19) Purchases 180 000 (b) Calculate the current account balances of Borin and Priti at 31 December 2020. Non-current assets: (5) Motor vehicles (Cost) 55 000 Office fixtures (Cost) 20 000 (c) Prepare the Statement of Financial Position at 31 December 2020. Provisions for depreciation: (14) Motor vehicles 30 000 Office fixtures 8 000 Wages and salaries 97 000 During the year ended 31 December 2020 the partners had agreed the following changes to their capital accounts. General expenses Allowance for irrecoverable debts Inventory at 1 January 2020 27 100 2700 On 1 March 2020 Priti had introduced new capital of 20 000 in cash. 38 000 Carriage inwards 4 200 Carriage outwards Bank 8% bank loan 19 000 17 500 Dr 30 000 Bank loan interest paid 1 200 Insurance 6 000 Rent payable 21 000 Rent receivable 4 000 Motor vehicles running expenses 11 000 Trade receivables Trade payables 50 000 19 000 On 1 April 2020 Borin had withdrawn 25 000 of his capital by cheque. (d) Prepare the Capital Accounts of Borin and Priti as they would appear in the books for the year ended 31 December 2020. (5) Javid is a manager in the partnership. He now wishes to join the partnership as a partner of Borin and Priti. He can introduce 5 000 cash as capital. (e) Evaluate whether Borin and Priti should admit Javid to the partnership. (12) (Total for Question 1 = 55 marks)