QuestionShumba and Shula are in partnership. The terms of their partnership agreementiii.Interest on drawings in respect of the current financial year, the interestare as follows:amounted to K500o for Shumba and K1000 for Shula.1. Interest is to be calculated on the opening balances of both the capital andAn investigation indicated that credit losses could be K4000 during the nextcurrent accounts at the rates of 7.5% and 10% p.a. respectively.2. Shula is entitled to a monthly salary of K12503. Profit/losses are to be shared equally.financial period and the allowance for credit losses must be adjusted accordingly.Prepare:4. Interest on drawings, as per partners' decision.a) An income statement for the year ended 28 February 2002;b) Statement showing changes in the equity of the partnership for the yearThe information below relates to the business activities of the partnership for theended 28 February 2002.year ended 28 February 2002.NB: Show all calculations.Balances as at 28 February 2002K'000InventoryDebtors control13582Bank (Dr)98Motor vehicles at cost99Land and buildings at costAccumulated depreciation: Motor vehicles (1 March 2001)Trading account (gross profit for the year)Allowances for credit losses (1 March 2001)Administration expensesCapitals: Shumba (fixed)10049200180240Shula (fixed)160Current accounts: Shumba (Cr. 1 March 2001)Shula (Dr. 1 March 2001)5040Drawings: ShumbaShula5511Additional information:i.Credit losses should amount to K2000ii.Depreciation on motor vehicles. Provide for 30% p.a. according to thediminishing-balance method.

Income statement The purpose of preparing the income statement is to know the net income which are…

i. Interest on drawings in respect of the current financial year, the interest amounted to K500o for Shumba and K1000 for Shula. An investigation indicated that credit losses could be K4000 during the next financial period and the allowance for credit losses must be adjusted accordingly. Prepare: a) An income statement for the year ended 28 February 2002; b) Statement showing changes in the equity of the partnership for the year ended 28 February 2002. NB: Show all calculations.

i. Interest on drawings in respect of the current financial year, the interest amounted to K500o for Shumba and K1000 for Shula. An investigation indicated that credit losses could be K4000 during the next financial period and the allowance for credit losses must be adjusted accordingly. Prepare: a) An income statement for the year ended 28 February 2002; b) Statement showing changes in the equity of the partnership for the year ended 28 February 2002. NB: Show all calculations.

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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