Question

Peter and John have been in partnership for many years and sharing the profits according to the ratio 3:5. The trial balance at the year ended 31 December 2019 is given below:

	Dr. ($)	Cr. ($)
Cash	3,000,000
Equipment: Cost	60,000
Equipment: Accumulated depreciation		30,000
Capital accounts:
Peter		100,000
John		70,000
Current accounts:
Peter		150,000
John		80,000
Drawings:
Peter	22,000
John	14,000
Sales		9,545,000
Cost of goods sold	6,000,000
Salaries expense	800,000
Rent expense	70,000
Prepaid rent	9,000
Total	9,975,000	9,975,000

Addition Information:

1) Depreciation expense is not yet provided in the trial balance. The depreciation expense in the year amounted to $8,000.

2) Interest on capital is 6% per annum. The interest is recorded at the end of a year.

3) Peters salaries of $10,000 have been included in salaries expenses.

4) Interest on drawings is 10% per annum. Interest on drawings is recorded at the end of a year. The dates of the partners drawings incurred are listed as follows:

	1 June 2019	1 September 2019	3 November 2019	Total
Peter	$5,000	$8,000	$9,000	$22,000
John			$14,000	$14,000

Required:

(a)	Calculate net income for the year ended 31 December 2019. Show your workings.
(b)	Calculate interest on drawings (Peter and John) for the year ended 31 December 2019. Show your workings.
(c)	Calculate share of profits between Peter and John. Show your workings.