anie, Justin and Adam are in partnership sharing profits and losses equally after allowing for interest on capital at the rates of 5% per annum to the partners and a salary to Justin of $ 60 per month. The trial balance of the partnership as at 30 September 2020 was as follows.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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anie, Justin and Adam are in partnership sharing profits and losses equally after allowing for interest on capital at the rates of 5% per annum to the partners and a salary to Justin of $ 60 per month.

The trial balance of the partnership as at 30 September 2020 was as follows. 

  $ $
Sales   60,000
Inventory (1 October 2019) 9,000  
Purchases 30,000  
Operating expenses 19,200  
Loan from: Justin    3,000
                     Adam   6,000
Land 3,000  
Building 15,000  
Plant and machinery (cost) 21,000  
Accumulated depreciation (30 September 2020)        12,000
Accounts receivable and accounts payable 12,000   9,900
Bank overdraft   3,300
Capital accounts:    Lanie   7,500
                                   Justin   6,000
                                   Adam     3,000
Current accounts:  Lanie 600  
                                  Justin   900
                                  Adam   600
Drawings:   Lanie 900  
                      Justin     1,200  
                      Adam 600    
        112,800      112,800

 

Additional information:

1. On 1 April 2020, the terms of the partnership agreement were changed. The new terms provided as follows:


    • A profit-sharing ratio of 5:3:2 for Lanie, Justin and Adam respectively.
    • Salaries of $ 30 per month to Justin and Adam.
    • Interest on capital at the rate of 5% per annum.
    • For the purpose of the changes , goodwill was valued at $3,600 and was to be written off immediately while the land and buildings were valued at $6, 000 and $19,200 respectively.

2. Sales include a credit sale of $1,800 in respect of goods sold on the basis of confirmation by the customer. The goods had cost $600. As at 30 September 2020; the customer had not confirmed whether he would buy the goods.

3. Interest on the loans from Justin and Adam is to be charged at the rate of 10% per annum. This interest had not been paid as at 30 September 2020.

4. Closing inventory as at 30 September 2020 was valued at $ 7,200.

5. Unless where otherwise provided, the incomes and expenses accrued evenly throughout the year.

Required:

  1. The statement of profit and loss for the year ended 30 September 2020.
  2. Partners’ current accounts as at 30 September 2020.                    
  3. Statement of financial position as at 30 September 2020.       
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