Question 1 A. Pink and Floyd are in partnership. Up to 30 June they had been sharing profits and losses equally after allocating each partner 6% per year interest on capital and annual salaries of 28,000 to Pink and 16,000 to Floyd. They have decided that as from 1 July 2013 the profits and losses will be shared Pink 2/3 and Floyd 1/3 after giving each partner 8% per year interest on capital and annual salaries of 36,000 to Pink and 30,000 to Floyd. The profit for the year ended 31 December 2013 was 100,000 and this has accrued evenly over the year. The following is the statement of financial position at 31 December 2013 before the allocation of the year's profit between the partners and any other entries relating to the change in the partners' profit sharing ratio: ASSETS '000 '000 '000 530 Non-current assets Freehold premises Current assets Inventories 90 Trade receivables 30 Cash and cash equivalents 15 135 Total assets 665 LIABILITIES Current liabilities (25) Trade payables Total liabilities NET ASSETS (25) 640 EQUITY Capital Capital accounts Profit Pink Floyd 240 160 400 Current accounts 80 60 140 Net profit 100 100 TOTAL EQUITY 320 220 100 640 The above balances on the partners' capital accounts are as at 31 December 2012. On 1 July 2013 the freehold land and buildings were revalued at 630,000. This is not reflected in the statement of financial position above but the partners wish the revaluation effects to be included. Please turn over Required i) Prepare the partners' capital accounts as at 1 July 2013 showing the effect of the revaluation of land. (3 marks) ii) Prepare the profit and loss appropriation account for the year ended 31 December 2013. iii) Prepare a statement of financial position as at 31 December 2013 showing all the entries in the partners current accounts after giving effect to the change in the partners' profit-sharing ratio