Question 3A: Ansar, Azam and Azeem are partners with the capital balances of Rs. 80, 000; Rs. 55, 000 and Rs. 45, 000 respectively. 8% interest is allowed on their capital balances. All three partners are entitled to an annual salary of Rs.15, 000 and Azeem received commission of Rs. 10, 000. The remaining net income or loss is to be distributed according to the ratio of 5: 3: 2. The net income for the year ended December 31, 2018 is Rs. 90, 000.

Instructions: a. Prepare Income Distribution Summary b. Record the distribution of income in the journal of A1 & Company.

Question 3B: Nelson and Allan doing their business separately. On January 1st 2009 they decided to join their business under the name and style of SKY Traders. The following balances are taken from their books of account at the time of formation of partnership firm.

Particulars Nelson Allan

Cash 100,000 120,000

Account receivable 120,000 70,000

Merchandise inventory 200,000 210,000

Equipments 120,000 180,000

Machinery 140,000 120,000

Account payable 160,000 180,000

Allowance for Depreciation-Equipment 20,000 40,000

Allowances for bad debts 10,000 12,000

The partners agreed to take over all the assets and liabilities at book value.

Instructions:

a. Give entries in general journal to record the investment of partners

b. Prepare Initial Balance sheet.