Question 1 (50 Marks) Geoff, Henry and lan are in partnership sharing profits and losses in the ratio 4:2:2. The partners receive a salary of N$5,000, N$6,000 and N$7,000 each and are entitled to interest on the balance on their capital accounts at 5% per annum. lan is entitled to a guaranteed share of profits, in addition to his salary and interest on capital, of N$6,000 any deficiency to be borne by Geoff and Henry equally. The following is the draft statement of financial position of the partnership as at 31 October 2015 (before the profit for the year has been divided between the partners). Draft Statement of Financial Position as at 31 October 2015 Cost Accumulated NBV Depreciation Non-current Assets NS NS NS Premises 250,000 50,000 200,000 Plant and machinery 130.000 65,000 65,000 Furniture and fittings 25.000 5.000 20.000 405.000 120.000 285.000 Current Assets Inventory 30,000 Trade receivables 26,000 Bank 12.000 68.000 TOTAL ASSETS 353.000 Equity and Liabilities Equity Partners' Capital Accounts Geoll 80,000 Henry 70,000 lan 70.000 220,000 Partners Current Accounts Geoff 16,000 Henry (20,000) lan 10.000 6,000 Profit for the year (not yet divided between 88,000 the partners) Current liabilities Payables 26,000 Short term loan from Nambank 13.000 39.000 TOTAL EQUITY AND LIABILITIES 353,000 Question 1 (Cont'd.) Adjustments are required in respect of the following items: 1) Depreciation for the year has not been provided. It should be provided for as follows: Premises.... N$5,000 Plant and machinery..... N$26,000 Furniture and fittings..... N$5,000 2) Wages and salaries for the month ending 31st October (20,000) 10.000 6,000 88,000 Henry lan Profit for the year (not yet divided between the partners) Current liabilities Payables Short term loan from Nambank TOTAL EQUITY AND LIABILITIES 26,000 13.000 39.000 353.000 Question 1 (Cont'd.) Adjustments are required in respect of the following items: 1) Depreciation for the year has not been provided. It should be provided for as follows: Premises... N$5,000 Plant and machinery..... N$26,000 Furniture and fittings..... N$5,000 2) Wages and salaries for the month ending 31 October 2015 amounting to N$14,000 have not been paid nor provided for in the above financial statements. 3) Rent amounting to N$21,000 was paid on 01 September 2015 for the three months ending 30th November 2015 You are required to prepare: a) A statement setting out the adjustments required to the profit for the year arising out of items (1) to (3) above; (10 Marks) b) A statement setting out the appropriation of the adjusted profit between the partners; (10 Marks) c) The current accounts of the partners; (10 Marks) d) The revised Statement of Financial Position as at 31 October 2015 after dealing with parts (a) to (c) above. (20 Marks) [Total: 50 Marks)
