Exercise 2

Gervais and Harpeet are in partnership. They maintain fixed capital accounts at $50,000 and $32,000 respectively. The profit for the year ended 31 August 2014 was $47,632.

The partnership agreement provides that Harpreet be credited with a partnership salary of $3,750 per annum; that interest at the rate of seven per cent per annum be credited on partner's capital account balances; and that residual profits be shared in the ratio 4:1 respectively.

Required

Prepare an appropriation account for the year ended 31 August 2014.