Sweet and Sour had traded successfully for a number of years as partners in their grocery shop. They decided to admit their manager Bitter as a partner from July 1, 2008. Both partnership agreements provided for: i. Salaries to Sour of GHS20,000 per annum and to Bitter GHS24,000 per annum for his ii. Interest on loan and capital account at 10% per annum. iii. All residual profit and losses to be shared equally. The summarized trial balance of the partnership of Sweet, Sour and Bitter at 31 December, 2008 are as follows: admission as a partner. DEBIT CREDIT GHS GHS Freehold premises at cost 300,000 Fittings/equipment at cost 60,000 Accu. Depreciation fitting/equipment to 31/12/08 30,000 Inventories at 31/12/08 120,000 Receivables 52,000 Bank overdraft 100,000 Payables 2,000 Loan Account: Sweet 140,000 Bitter 40,000 Operating profit for the year (before loan interest) 100,000 Capital Account (before adjustment): Sweet 80,000 Bitter 20,000 Sour 60,000 Current Account: Sweet 20,000 Sour 10,000 Drawings: Sweet 12,000 Sour 12,000 Bitter 6,000 _______ The above trial balance does not include: i. Interest on the loan account for the year. ii. The transfer of Bitter?s loan account to his capital account on his admission as a iii. The revaluation of freehold premises to GHS400,000 on the admission of Bitter as a 580,000 580,000 partner. partner. 1 iv. The introduction of GHS60,000 agreed goodwill on July 1, 2008 which was The operating profit for the first 6 months is GHS44,000 which is after deducting Bitter?s salary as a manager. The operating profit for the second 6 months is GHS56,000. You are required to prepare: a) Capital Account for the partners to record the adjustment necessary on the admission of Bitter as a partner. b) Income Surplus Account for the 6 months period ended 30 June, 2008 and 31 December, 2008. c) Current Account for each partner for the year to 31 December, 2008. d) Prepare the partnership Statement of Financial Position as at 31 December, 2008. subsequently eliminated from the partnership account.

PARTNERSHIP Try question one (Admission) Sweet and Sour had traded successfully for a number of years as partners in their grocery shop. They decided to admit their manager Bitter as a partner from July 1, 2008. Both partnership agreements provided for: i. Salaries to Sour of GHS20,000 per annum and to Bitter GHS24,000 per annum for his admission as a partner. ii. Interest on loan and capital account at 10% per annum. iii. All residual profit and losses to be shared equally. The summarized trial balance of the partnership of Sweet, Sour and Bitter at 31 December, 2008 are as follows: DEBIT CREDIT GHS GHS Freehold premises at cost 300,000 Fittings/equipment at cost 60,000 Accu. Depreciation fitting/equipment to 31/12/08 30,000 Inventories at 31/12/08 120,000 Receivables 52,000 Bank overdraft 100,000 Payables 2,000 Loan Account: Sweet 140,000 Bitter 40,000 Operating profit for the year (before loan interest) 100,000 Capital Account (before adjustment): Sweet 80,000 Bitter 20,000 Sour 60,000 Current Account: Sweet 20,000 Sour 10,000 Drawings: Sweet 12,000 Sour 12,000 Bitter 6,000 _______ 580,000 580,000 The above trial balance does not include: i. Interest on the loan account for the year. ii. The transfer of Bitter's loan account to his capital account on his admission as a partner. iii. The revaluation of freehold premises to GHS400,000 on the admission of Bitter as a partner. 1 Intermediate Accounting I - Joseph Sarpong Konadu, SOB, VVU iv. The introduction of GHS60,000 agreed goodwill on July 1, 2008 which was subsequently eliminated from the partnership account. The operating profit for the first 6 months is GHS44,000 which is after deducting Bitter's salary as a manager. The operating profit for the second 6 months is GHS56,000. You are required to prepare: a) Capital Account for the partners to record the adjustment necessary on the admission of Bitter as a partner. b) Income Surplus Account for the 6 months period ended 30 June, 2008 and 31 December, 2008. c) Current Account for each partner for the year to 31 December, 2008. d) Prepare the partnership Statement of Financial Position as at 31 December, 2008. 2 Intermediate Accounting I - Joseph Sarpong Konadu, SOB, VVU