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Britney Clinton and Hillary Spears conduct business in partnership and share in profit and losses of the partnership in a 3:2 ratio, respectively. Their bookkeeper has prepared the following Statement of Profit or Loss and other Comprehensive income in respect of the partnership's 2019 year of assessment: R R Income Gross income Bad Debts recovered (note 1) Dividends received (note 2) Interest from a South African source Settlement 487 000 3750 4 500 6 360 19 390 521 000 Less: Expenditure Credit losses (note 1) Donations (note 4) Insurance (note 5) Delivery van purchased (note 3) Licences: Trade and delivery van Delivery van running expenses Depreciation Shop fittings at 10% (note 3) Cash register at 10% (note 3) Rental paid Staff salaries and wages Stationery and printing Drawings: Britney (note 6) Salaries paid: Britney Hillary Net profit 6 000 18 750 13 500 39 600 1 080 5 500 4 500 2 250 21 600 90 000 1 080 6 600 36 000 45 000 291 460 229 540 Net profit Britney (60%) Hillary (40%) 137 724 91 816 229 540 Notes: 1. The credit loss of R3 750 was recovered from a former debtor of Britney when he had been trading on his own, two years before. Britney sold his debtors to the partnership. R2 000 of the bad debts relates to debts that the partners took over when they purchased the business. The balance of the bad debts is wholly in respect of present customers who have failed to pay their accounts. 2. During the 2019 year of assessment, the partners decide to invest their surplus cash funds and they purchased 25 000 shares in Pablo (Pty) Ltd, a company registered in the Republic, at R3 a share. The company paid a dividend of R4 500 to the partnership on 31 December 2018.

Britney Clinton and Hillary Spears conduct business in partnership and share in profit and losses of the partnership in a 3:2 ratio, respectively. Their bookkeeper has prepared the following Statement of Profit or Loss and other Comprehensive income in respect of the partnership's 2019 year of assessment: R R Income Gross income Bad Debts recovered (note 1) Dividends received (note 2) Interest from a South African source Settlement 487 000 3750 4 500 6 360 19 390 521 000 Less: Expenditure Credit losses (note 1) Donations (note 4) Insurance (note 5) Delivery van purchased (note 3) Licences: Trade and delivery van Delivery van running expenses Depreciation Shop fittings at 10% (note 3) Cash register at 10% (note 3) Rental paid Staff salaries and wages Stationery and printing Drawings: Britney (note 6) Salaries paid: Britney Hillary Net profit 6 000 18 750 13 500 39 600 1 080 5 500 4 500 2 250 21 600 90 000 1 080 6 600 36 000 45 000 291 460 229 540 Net profit Britney (60%) Hillary (40%) 137 724 91 816 229 540 Notes: 1. The credit loss of R3 750 was recovered from a former debtor of Britney when he had been trading on his own, two years before. Britney sold his debtors to the partnership. R2 000 of the bad debts relates to debts that the partners took over when they purchased the business. The balance of the bad debts is wholly in respect of present customers who have failed to pay their accounts. 2. During the 2019 year of assessment, the partners decide to invest their surplus cash funds and they purchased 25 000 shares in Pablo (Pty) Ltd, a company registered in the Republic, at R3 a share. The company paid a dividend of R4 500 to the partnership on 31 December 2018.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Britney Clinton and Hillary Spears conduct business in partnership and share in profit and losses of the partnership in a 3:2 ratio, respectively. Their bookkeeper has prepared the following Statement of Profit or Loss and other Comprehensive income in respect of the partnership's 2019 year of assessment: R Income Gross income Bad Debts recovered (note 1) Dividends received (note 2) Interest from a South African source Settlement 487 000 3 750 4 500 6 360 19 390 521 000 Less: Expenditure Credit losses (note 1) Donations (note 4) Insurance (note 5) Delivery van purchased (note 3) Licences: Trade and delivery van Delivery van running expenses Depreciation Shop fittings at 10% (note 3) Cash register at 10% (note 3) Rental paid Staff salaries and wages Stationery and printing Drawings: Britney (note 6) Salaries paid: Britney Hillary Net profit 6 000 18 750 13 500 39 600 1 080 5 500 4 500 2 250 21 600 90 000 1 080 6 600 36 000 45 000 291 460 229 540 Net profit Britney (60%) Hillary (40%) 137 724 91 816 229 540 Notes: 1. The credit loss of R3 750 was recovered from a former debtor of Britney when he had been trading on his own, two years before. Britney sold his debtors to the partnership. R2 000 of the bad debts relates to debts that the partners took over when they purchased the business. The balance of the bad debts is wholly in respect of present customers who have failed to pay their accounts. 2. During the 2019 year of assessment, the partners decide to invest their surplus cash funds and they purchased 25 000 shares in Pablo (Pty) Ltd, a company registered in the Republic, at R3 a share. The company paid a dividend of R4 500 to the partnership on 31 December 2018.
Transcribed Image Text:Britney Clinton and Hillary Spears conduct business in partnership and share in profit and losses of the partnership in a 3:2 ratio, respectively. Their bookkeeper has prepared the following Statement of Profit or Loss and other Comprehensive income in respect of the partnership's 2019 year of assessment: R Income Gross income Bad Debts recovered (note 1) Dividends received (note 2) Interest from a South African source Settlement 487 000 3 750 4 500 6 360 19 390 521 000 Less: Expenditure Credit losses (note 1) Donations (note 4) Insurance (note 5) Delivery van purchased (note 3) Licences: Trade and delivery van Delivery van running expenses Depreciation Shop fittings at 10% (note 3) Cash register at 10% (note 3) Rental paid Staff salaries and wages Stationery and printing Drawings: Britney (note 6) Salaries paid: Britney Hillary Net profit 6 000 18 750 13 500 39 600 1 080 5 500 4 500 2 250 21 600 90 000 1 080 6 600 36 000 45 000 291 460 229 540 Net profit Britney (60%) Hillary (40%) 137 724 91 816 229 540 Notes: 1. The credit loss of R3 750 was recovered from a former debtor of Britney when he had been trading on his own, two years before. Britney sold his debtors to the partnership. R2 000 of the bad debts relates to debts that the partners took over when they purchased the business. The balance of the bad debts is wholly in respect of present customers who have failed to pay their accounts. 2. During the 2019 year of assessment, the partners decide to invest their surplus cash funds and they purchased 25 000 shares in Pablo (Pty) Ltd, a company registered in the Republic, at R3 a share. The company paid a dividend of R4 500 to the partnership on 31 December 2018.
3. The depreciation claimed in the Statement of Profit or Loss and other Comprehensive Income has been calculated on the straight-line method in respect of the shop fittings and the cash register. These items were purchased on 1 March 2018. No depreciation has been provided for in the Statement of Profit or Loss and other Comprehensive Income in respect the delivery van which was purchased on 1 May 2018 for R39 600 (excluding VAT). The approved write-off periods are: Shop fittings: Cash register: Delivery vehicles: six years five years four years 4. During the 2019 year of assessment, the partnership made the following donations: R To a non-public benefit organisation To a public benefit organisation 3 750 15 000 Official receipts were obtained. Britney also donated R20 000 in his own name to a qualifying public benefit organisation and obtained the required receipt. 5. Insurance premiums paid during the year were in respect of the following policies: R 8 625 4 875 13 500 Loss of profits profit policy Fire policy 6. Other partnership information (not taken into account in arriving at the net profit of R222 040: Britney R Hillary R Interest on capital Drawings (including the R6 600 deducted in the Statement of Profit or Loss and other Comprehensive income) 20 000 108 000 90 000 7. Both partners are under the age of 65 years. All amounts paid to or on behalf the partners are in accordance with the partnership agreement. Calculate taxable income of the partnership for the current year of assessment.
Transcribed Image Text:3. The depreciation claimed in the Statement of Profit or Loss and other Comprehensive Income has been calculated on the straight-line method in respect of the shop fittings and the cash register. These items were purchased on 1 March 2018. No depreciation has been provided for in the Statement of Profit or Loss and other Comprehensive Income in respect the delivery van which was purchased on 1 May 2018 for R39 600 (excluding VAT). The approved write-off periods are: Shop fittings: Cash register: Delivery vehicles: six years five years four years 4. During the 2019 year of assessment, the partnership made the following donations: R To a non-public benefit organisation To a public benefit organisation 3 750 15 000 Official receipts were obtained. Britney also donated R20 000 in his own name to a qualifying public benefit organisation and obtained the required receipt. 5. Insurance premiums paid during the year were in respect of the following policies: R 8 625 4 875 13 500 Loss of profits profit policy Fire policy 6. Other partnership information (not taken into account in arriving at the net profit of R222 040: Britney R Hillary R Interest on capital Drawings (including the R6 600 deducted in the Statement of Profit or Loss and other Comprehensive income) 20 000 108 000 90 000 7. Both partners are under the age of 65 years. All amounts paid to or on behalf the partners are in accordance with the partnership agreement. Calculate taxable income of the partnership for the current year of assessment.
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