c) Peach is to introduced $20000 as capital, part of which was used on 1 January to purchase a new motor vehicle for $8000 and additional stock for $4000. d) Profits and losses are to be shared in proportion to the Capital account. e) Interest on capital is at 12% p.a. and interest on drawing is to be charged at a flat rate of 15% on the total amount drawn by each partner. f) Peach is to receive salary of $5000 p.a. During the year ended 31 December 2021 the partners drawings were: Rice - $4200 Flower - $5000 Peach - $2800 The net income (before writing of the goodwill and allowing the salary of Peach) for the year ended 31 December 2021 was $33600. The capital accounts remains unchanged from 1 January 2021 to 31 December 2021. Required: a) Prepare the statement of financial position as at 1 January 2021. b) Prepare the appropriation of Income statement for the year ended 31 December 2021.
c) Peach is to introduced $20000 as capital, part of which was used on 1 January to purchase a new motor vehicle for $8000 and additional stock for $4000. d) Profits and losses are to be shared in proportion to the Capital account. e) Interest on capital is at 12% p.a. and interest on drawing is to be charged at a flat rate of 15% on the total amount drawn by each partner. f) Peach is to receive salary of $5000 p.a. During the year ended 31 December 2021 the partners drawings were: Rice - $4200 Flower - $5000 Peach - $2800 The net income (before writing of the goodwill and allowing the salary of Peach) for the year ended 31 December 2021 was $33600. The capital accounts remains unchanged from 1 January 2021 to 31 December 2021. Required: a) Prepare the statement of financial position as at 1 January 2021. b) Prepare the appropriation of Income statement for the year ended 31 December 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
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Transcribed Image Text:Rice and Flower were partners sharing profit and loss equally. Statement of Financial Position as
at 31 December 2020.
Non current Assets
Premises
Machinery
Vehicles
Fittings
Current Assets
Inventory
Account receivables
Cash
Partners Equity
Capital - Rice
Current Account - Rice
Capital Flower
Current - Flower
Current Liabilities
Account payables
Bank overdraft
9800
12640
60
36000
2600
36000
1800
9850
1250
35000
20000
4000
6000
65000
22500
87500
38600
37800
11100
87500
On 1 January 2021 the partners agreed to admit Peach as a partner under the following
conditions:
a) A goodwill account to be created at $16000 and to be a amortise (written off) over the
first 4 years of the new partnership (similar to straight line method of depreciation.
b) Premises to be revalue at $45000 and Fittings at $8000.
Transcribed Image Text:c) Peach is to introduced $20000 as capital, part of which was used on 1 January to
purchase a new motor vehicle for $8000 and additional stock for $4000.
d) Profits and losses are to be shared in proportion to the Capital account.
e) Interest on capital is at 12% p.a. and interest on drawing is to be charged at a flat rate of
15% on the total amount drawn by each partner.
f) Peach is to receive salary of $5000 p.a.
During the year ended 31 December 2021 the partners drawings were:
Rice - $4200
Flower - $5000
Peach - $2800
The net income (before writing of the goodwill and allowing the salary of Peach) for the year
ended 31 December 2021 was $33600. The capital accounts remains unchanged from 1 January
2021 to 31 December 2021.
Required:
a) Prepare the statement of financial position as at 1 January 2021.
b) Prepare the appropriation of Income statement for the year ended 31 December 2021.
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