JOHN and FRED are trading in partnership, sharing profits and losses equally. Interest at 5% per annum is allowed or charged on both the capital account and the current account balances at the beginning of the year. Interest is charged on drawings at 5% per annum. Their trial balance is as shown below: JOHN AND FRED Trial Balance as at 31 December 2011

	Dr.	Cr.
Freehold premises at Cost	500,000
Inventory at 1 January 2001	750,000
Fixtures and fittings at cost	150,000
Purchases purchase returns	3800,000	120,000
Bank	310,600
Sales sales returns	60,000	5,008,000
Accounts receivable accounts payable	520,400	330,300
Carriage inwards	210,500
Carriage outwards	30,000
Staff salaries	420,000
VAT		80,700
Capital accounts: JOHN		1,000,000
FRED		500,000
Current accounts: JOHN		20,000
FRED	6,000
Cash drawings for the year: JOHN	150,000
FRED	100,000
Rent and business rates	20,800
Accumulated provision for depreciation of fixtures and fittings		30,000
	7200,000	7200,000

At 31 December2001: (a) closing stock was valued at 680,000. (b) Purchase invoices amounting to 30,000 for goods included in the inventory valuation at above had not been recorded. (c) Staff salaries accrued by 9,000. (d) rates prepayments 2,000. (e) provision for doubtful debts for doubtful debts to be increased to 20,400. (f) partners withdrew goods for private use and had not been recorded and were valued at: JOHN 5,000, FRED 6,300. No interest is to be charged on these amounts. (g) Provision is to be made for depreciation of fixtures and fittings at 10% on cost. (h) Interest on drawings for the year is to be charged: JOHN 3,600, FRED 2,800. (i) The partners are entitled to annual salaries of: JOHN 12,000;FRED 8,000. REQUIRED a)Prepare the income statement for the partners. (15 mks) b)Show the partners current accounts after the income statement (5 mks) c)Prepare the statement of financial position for the above partners. (5 mks)

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