Question 3 (15 marks) Seow and Tan commence trading on 1 April 2019 when Seow, an established retailer in a small town in Malaysia, entered into partnership with Tan. A colleague in your firm has already produced a draft income statement and a draft balance sheet for the partnership for the year ended 31 March 2020 but has become unwell and is unable to complete all the entries required and finalize the financial statements. You have been asked to complete the task. From the file of information left by your colleague you have discovered that a net profit of $70,000 had been made by the partnership according to the draft income statement. No appropriation account or partner current accounts had yet been completed and some adjustment may be necessary to the draft net profit figure. Your colleague has left a memorandum with the following information which may be relevant.

(a) Seow made a loan of $12,000 to the partnership on 1 April 2019. Interest on the loan is to be credited to Seow at a rate of 12 %.

(b) The partners are to be credited with annual salaries as follows:

i. Seow - $30,000

ii. Tan - $20,000

(c) The partners are to be credited with interest on their capital account balances at the rate of 10% per annum.

i. Capital account balance: Seow - $50,000

ii. Capital account balance: Tan - $30,000

(d) The balances of net profits and losses are to be shared between Seow and Tan in the proportions 3/ 5 and 2/ 5 respectively

(e) The partners have made the following drawings during the year. i. Seow - $16,700 ii. Tan - $22,300 (f) Separate capital accounts and current accounts are to be maintained for each partner.

Required:

A) Draw up the appropriation account for partnership of Seow and Tan for the year ended 31 March 2020. (7 marks)

B) Prepare the partners current accounts for the year ended 31 March 2020. (4 marks)

C) Give two advantages and two disadvantages of the Seow and Tan partnership business structure. (4 marks)