QUESTION 1 (32 Marks) Petu, Mika and Simon are in a partnership and share profits or losses in the ratio 3:2:1. Petu, Mika and Simon received salaries of N$120 000, N$100 000 and N$80 000 respectively as well as 10% interest on the opening balance of their capital. Petu received an entertainment allowance of N$20 000. Apele is the general manager. PMS PARTNERSHIP Statement of financial position as at 31 December 2019 N$ N$ ASSETS Non-current assets Land and building Vehicles Total non-current assets 420 000 100 000 520.000 Current assets Inventories Receivables Cash and cash equivalents Total current assets Total assets 10 000 50 000 110 000 170 000 690 000 420 000 200 000 120 000 100 000 58 750 EQUITY AND LIABILITIES Equity Capital: Petu Mika Simon Current account: Petu Mika Simon Total equity Current liabilities Payables Total equity and liabilities 45 000 (10 000) 23 750 478 750 211 250 690 000 Additional information: On 31 December 2019, Petu, Mika, and Simon decide to admit Apele as a partner on the following conditions: (0) (ii) Admission of Apele will be effective as from 01 January 2020. Apele's contribution consists of a vehicle with a carrying amount of N$50 000, inventories N$ 50 000 and cash N$104 000. The partners of the partnership, Petu, Mika and Simon, receive the same salaries and interest on capital as previously but Apele's salary is reduced to N$40 000, and no bonus or others allowances are allowed in the partnership Petu, Mika, Simon and Apele. Apele receives 5% interest on capital. (iv) The abridged statement of income for the year ended 31 December 2019: N$ Services rendered 794 000 Salary: Apele (120 000) Bonus: Apele (72 000) Other expenses (60 000) Profit 542 000 Apele will receive 1/6 of the profit or losses and the profit sharing ratio of Petu, Mika and Simon will remain the same. On the same day Simon decides to withdraw from the partnership under the following conditions: (0) (ii) (iii) (iv) Simon's share must be divided amongst Petu, Mika and Apele in the ratio 1:2:2. Land and buildings are valued at N$780 000 only for the purpose of Simon's withdrawal. Tiger receives a cheque for his share of the partnership. The new partners Petu, Mika and Apele's capital accounts must be in profit sharing ratio by using Apele's capital as basis. Surplus capital shall be paid back to partners and shortfall shall be paid in. YOU ARE REQUIRED TO: (a) Calculate the profit sharing ratio of Petu, Mika, Simon and Apele after the admission of Apele. (5 marks) (b) Prepare the capital account of the partners in column form. (15 marks) (c) Prepare the statement of financial position of Petu, Mika and Apele as at 31 December 2019 (12 marks)