Prepare

The statement of profit or loss and the partner's capital and current accounts for the year ended 31 December 2019

Statement of financial position as at that date.

Prepare

The statement of profit or loss and the partner's capital and current accounts for the year ended 31 December 2019

Statement of financial position as at that date.

QUESTION TWO Study the Following partnership case and answer the question below James and Kenneth have been trading in partnership for several, sharing profits or losses equally after allowing for interest on their capitals at 8% pa. At 1 September 2019 their manager, Lilian, was admitted as a partner and was to have a one-fifth share of the profits after interest on capital. James and Kenneth shared the balance equally but guaranteed that Lilian's share would not fall below Sh.6,000 p.a. Lilian was not required to introduce any capital at the date of admission but agreed to retain Sh.1,500 of his profit share at the end of each year to be credited to his capital account until the balance reached Sh.7,500, until that time no interest was to be allowed on his capital. Goodwill, calculated as a percentage of the profits of the last five years was agree at Sh.15,000 at September 2019, and Lilian paid into the business sufficient cash for his share. No goodwill accounts were to be left in the books. Land and building were professionally valued at the same date Sh.28,400 and this figure was to be brought into the books, whilst the book value of the equipment and vehicles was, by mutual agreement, to be reduced to Sh.15,000 at the date. Lilian had previously been entitled to a bonus of 5% of the gross profit payable half-yearly, the bonus together with his manager's salary were cease when he became a partner. was agreed to take out a survivorship policy and the first premium of Sh.1,000 was paid on 1 September 2019. The trial balance at the end of the 2019 financial year is given below. No adjustments had yet been made in respect of Lilian's admission, and the amount he introduced for goodwill had been put into his current account. The drawings of all the partners have been changed to their current account. It can be assumed that the gross profit and trading expenses accrued evenly throughout the year. Depreciation on the equipment and vehicles is to be charges at 20% p.a. on the book value. Sh. Sh. Capital accounts James 30,000 Kenneth 15,000 Current accounts James 7,800 Kenneth 7,100 Lilian 1,800 18,000 21,000 Land and buildings Equipment and vehicles Inventory Gross profit 9,200 42,000 15,000 4,000 1,050 Trading expenses Managers salary Managers bonus Accounts receivables & Payables Premium on survivorship policy Bank balance 4,850 3,100 1,000 2,900 91,900 91,900 III O