Question
Dave, Andrew, and Timothy have operated a partnership business for several years sharing profits and losses in the ratio 4:2:3. Interest of 6% per annum
Dave, Andrew, and Timothy have operated a partnership business for several years sharing profits and losses in the ratio 4:2:3. Interest of 6% per annum is to be computed on the capital invested and all drawings are to be charged a per annum rate of 5%. Andrew is to be granted a monthly salary of $600 for working extra hours in the business and Timothy will receive a salary of $4,500 per annum. The partnership list of balances at December 31, 2023 is given below:
DR | CR | ||
$ | $ | ||
Land | 380,000 | ||
Premises ($280,000 at cost) | 210,000 | ||
Fixtures | 85,625 | ||
Motor Vehicles | 65,000 | ||
Accumulated Depreciation | |||
Fixtures | 14,035 | ||
Motor Vehicles | 12,535 | ||
Inventory | 14,500 | ||
Sales | 909,050 | ||
Utilities | 10,715 | ||
Purchases | 305,625 | ||
Sales Returns | 1,475 | ||
Import Duties | 1,540 | ||
Carriage Inwards | 1,435 | ||
Discounts | 3,500 | 950 | |
Commission Received | 2,985 | ||
Administration Expenses | 25,480 | ||
Accounts Receivable | 38,600 | ||
Distribution Expenses | 21,600 | ||
Accounts Payable | 17,920 | ||
Miscellaneous Expenses | 3,920 | ||
Salaries and Wages | 23,500 | ||
Bad Debts | 750 |
Capital Accounts (Jan 1, 2023)
Dave 109,000
Andrew 95,250
Timothy 85,500
Current Accounts (Jan 1, 2023)
Dave | 17,585 | ||
Andrew | 2,400 | ||
Timothy | 16,320 | ||
Bank | 56,525 | ||
Drawings (Jan 1, 2023) | |||
Dave | 5,000 | ||
Andrew | 6,400 | ||
Timothy | 3,800 | ||
Motor Vehicles Expenses | 13,740 | ||
1,281,130 | 1,281,130 |
ADDITIONAL INFORMATION
- Inventory at 31 December 2023 was valued at $22,500.
- An allowance for doubtful debts of 5% is to be created on the receivables.
- Depreciation is to be charged as follows:
- Motor Vehicles - 20% on cost/valuation.
- Fixtures - 15% on the written down value.
- Premises - $10,500 for the period.
The following transactions were NOT recorded during the year:
- On 1 July 2023, Andrew loaned the partnership $20,000 to be repaid in full in 2030.
- On August 1, 2023 Timothy invested $35,000 cash and a motor vehicle valued at $15,000 into the partnership.
- Some small items of goods were purchased and paid for out of the cash $6,500.
- Goods costing $1,400 were returned to the suppliers but no records were made during the year.
- Dave and Andrew took goods from the business during the year valued at cost for personal use. These were estimated at $2,800 and $1,900 respectively. Additionally, Dave, Andrew and Timothy withdrew $3,840, $18,200, and $5,725 respectively in cash from the business.
- A vehicle with a book value of $1,500 was sold for $1,750 cash. The cost of the vehicle was $2,500.
- The value of salaries of $23,500 included the amount paid to Andrew.
- At the end of the year administration expenses totaling $680 were prepaid while distribution expenses of $740 were still outstanding.
- One of the company's vehicles is used frequently by Timothy's daughter. The cost of this usage (included in the motor vehicle expenses) is an estimated $4,400; this is to be charged personally to Timothy.
REQUIRED
(a)An Income Statement for the year ended 31 December 2023. | |
(b)The partners' drawings and capital accounts using columnar format. | |
(c)A Statement of Appropriation for the year ended 31 December 2023. | |
(d)The partners' current accounts using columnar format. | |
(e)The Statement of Financial Position of the partnership at 31 December, 2023. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started