Question One

Chella and Shadreck are in partnership sharing profits and losses in the ratio 5:3 respectively.

The following information has been taken from the partnership records for the financial year ended 31 May 2019.

Partners' capital account balances:

Chella Shadreck

K380,000 K210,000

Partners current accounts, balances as at 1st June, 2018:

Chell a Shad reck

K54,000 K85,000

During the year ended 31 May 2019 the partners made the following withdrawals from the partnership bank account:

Chella

K 9,700 on 1 September 2018 K12,300 on 02 January, 2019

K 8,300 on 30 April 2019

Shadreck Kll,700 on 30 October 2018 Kll,OOO on 1st December, 2018 K8,500 on 1st May, 2019

Interest is to be charged on withdrawals at the rate of 8.5 % per annum. Interest is allowed on capital accounts and credit balances on current accounts at the rate of 11 % per annum.

Shadreck is to be allowed a salary of K53,000 per annum.

The net profit of the partnership for the year ended 31 May 2019 is K108,377.

Required:

(a) A computation of the amount of interest chargeable on each partner's withdrawals for the year ended 31 May 2019. ( 6 Marks)

(b) The partnership appropriation account for the year ended 31 May 2019. (8 Marks)

(c) The partners' current accounts showing the balances carried down as at 31 May 2019. (7Marks)