QUESTION THREE 20 Pitso and Steve are partners operating a business Topclass Pro Services The information that follows is relevant to the business activities of the partnership for the year ended 30 June 2020 Pitso and Steve share in profits and losses in the ratio of 3 2 respectively Topclass Pro Services Extract of relevant account balances as at 30 June 2020 Debit R Credit R Capital Pitso 270 000 Capital Steve 270 000 Current account Pitso balance at 1 July 2019 76 600 Current account Steve balance at 1 July 2019 52 900 Drawings for the year Pitso 68 310 Drawings for the year Steve 43 470 Long term loan from Pitso 110 000 Salaries paid to partners during the year Pitso 144 000 Steve 126 000 Profit for the year before taking the any of the additional 765 500 information into account Additional information The following has been extracted from the partnership agreement Interest must be calculated and recorded at the following rates at the end of each financial period All interest must be processed through the current accounts of the partners Interest rates are as follows Interest on capital must be calculated at 10 per year, Interest at 10 per year on current account balances at beginning of the year, Interest on drawings accounts balances has been calculated as follows Pitso R4 500 Steve R2 900 The following salaries are payable to the partners for the current year Pitso R12 000 per month, and Steve R15 000 per month Year end adjustments On 1 January 2020 Pitso contributed another R90 000 as capital to the partnership It was agreed that the amount will be included in his fixed capital account The transaction was correctly recorded as at 30 June 2020 Pitso granted an unsecured loan to the partnership on 1 January 2020 According to the loan agreement, interest will be charged at 10 per year The loan will be repaid in annual installments beginning 31 December 2024 Interest on the loan is still to be calculated and recorded in the books of the partnership Required Take the above information into account and adjust the Profit for the year to show the correct amount to be shared between the partners, Pitso and Steve Thereafter, prepare the statement of changes in equity for Topclass Pro Services for the year ended 30 June 2020 to clearly show the distribution of profits in terms of the partnership agreement Show all calculations Use the format suggested below Recommended format Topclass Pro Services Statement of changes in equity for the year ended 30 June 2020 Capital account PITSO R Steve R Total R Balance at 1 July 2019 Additional contributions Balance at 30 June 2020 Current Account Pitso R Steve R Total R Profit for the Year Appropriation Interest on Capital Interest on current a c Interest on Drawings Salaries due Share of profits Drawings Balance at 30 June 2020

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QUESTION THREE [20] Pitso and Steve are partners operating a business Topclass Pro Services. The information that follows is relevant to the business activities of

QUESTION THREE [20]

Pitso and Steve are partners operating a business Topclass Pro Services. The information that follows is relevant to the business activities of the partnership for the year ended

30 June 2020. Pitso and Steve share in profits and losses in the ratio of 3:2 respectively.

Topclass Pro Services

Extract of relevant account balances as at 30 June 2020

	Debit R	Credit R
Capital: Pitso		270 000
Capital: Steve		270 000
Current account: Pitso: balance at 1 July 2019	76 600
Current account: Steve: balance at 1 July 2019		52 900
Drawings for the year: Pitso	68 310
Drawings for the year: Steve	43 470
Long term loan from Pitso		110 000
Salaries paid to partners during the year:
Pitso	144 000
Steve	126 000
Profit for the year before taking the any of the additional		765 500
information into account

Additional information:

The following has been extracted from the partnership agreement:

Interest must be calculated and recorded at the following rates at the end of each financial period. All interest must be processed through the current accounts of the partners. Interest rates are as follows:

Interest on capital must be calculated at 10% per year,
Interest at 10% per year on current account balances at beginning of the year,
Interest on drawings accounts balances has been calculated as follows:
- Pitso R4 500
- Steve R2 900

The following salaries are payable to the partners for the current year:

Pitso: R12 000 per month, and Steve R15 000 per month.

Year-end adjustments:

On 1 January 2020 Pitso contributed another R90 000 as capital to the partnership. It was agreed that the amount will be included in his fixed capital account. The transaction was correctly recorded as at 30 June 2020.

Pitso granted an unsecured loan to the partnership on 1 January 2020. According to the loan agreement, interest will be charged at 10% per year. The loan will be repaid in annual installments beginning 31 December 2024. Interest on the loan is still to be calculated and recorded in the books of the partnership.

Required:

Take the above information into account and adjust the Profit for the year to show the correct amount to be shared between the partners, Pitso and Steve. Thereafter,

prepare the statement of changes in equity for Topclass Pro Services for the year ended 30 June 2020 to clearly show the distribution of profits in terms of the partnership agreement.

Show all calculations. Use the format suggested below.

Recommended format:

Topclass Pro Services

Statement of changes in equity for the year ended 30 June 2020

Capital account	PITSO R	Steve R	Total R
Balance at 1 July 2019
Additional contributions
Balance at 30 June 2020
Current Account:	Pitso R	Steve R	Total R
Profit for the Year
Appropriation:
Interest on Capital
Interest on current a/c
Interest on Drawings
Salaries due
Share of profits
Drawings
Balance at 30 June 2020