Exercise 3

Goctay and Hanif are in partnership. They supply the following information for the year ended 31 August 2014:

The partnership agreement provides that Goctay be credited with a partnership salary of $5,600; that partners be credited with interest on capital of eight per cent per annum; that partners be charged interest on their drawing of 5% per annum; and that residual profits be shared equally.

Goctay's fixed capital account stands at $42,000, while Hanif's fixed capital account stands at $50,000.

The profit for the year before appropriations was $56,934.

During the year, Goctay made drawings of $32,900 and Hanif's drawings were $21,750.

Interest on drawings were calculated at $348 for Goctay and $180 for Hanif.

Required

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