QUESTION 1 Petu, Mika and Simon are in a partnership and share profits or losses in the ratio 3:2:1. Petu, Mika and Simon received salaries of N$120 000, N$100 000 and N$80 000 respectively as well as 10% interest on the opening balance of their capital. Petu received an entertainment allowance of N$20 000. Apele is the general manager. PMS PARTNERSHIP Statement of financial position as at 31 December 2019 ASSETS N$ N$ Non-current assets Land and building 420 000 Vehicles 100 000 Total non-current assets 520 000 Current assets Inventories 10 000 Receivables 50 000 Cash and cash equivalents 110 000 Total current assets 170 000 Total assets 690 000 EQUITY AND LIABILITIES Equity Capital: 420 000 Petu 200 000 Mika 120 000 Simon 100 000 Current account: 58 750 Petu 45 000 Mika (10 000) Simon 23 750 Total equity 478 750 Current liabilities Payables 211 250 Total equity and liabilities 690 000 Additional information: On 31 December 2019, Petu, Mika, and Simon decide to admit Apele as a partner on the following conditions: Admission of Apele will be effective as from 01 January 2020. Apele’s contribution consists of a vehicle with a carrying amount of N$50 000, inventories N$50 000 and cash N$104 000. The partners of the partnership, Petu, Mika and Simon, receive the same salaries and interest on capital as previously but Apele’s salary is reduced to N$40 000, and no bonus or others allowances are allowed in the partnership Petu, Mika, Simon and Apele. Apele receives 5% interest on capital. The abridged statement of income for the year ended 31 December 2019: N$ Services rendered 794 000 Salary: Apele (120 000) Bonus: Apele (72 000) Other expenses (60 000) Profit 542 000 Apele will receive 1/6 of the profit or losses and the profit sharing ratio of Petu, Mika and Simon will remain the same. On the same day Simon decides to withdraw from the partnership under the following conditions: Simon’s share must be divided amongst Petu, Mika and Apele in the ratio 1:2:2. Land and buildings are valued at N$780 000 only for the purpose of Simon’s withdrawal. Simon receives a cheque for his share of the partnership. The new partners Petu, Mika and Apele’s capital accounts must be in profit sharing ratio by using Apele’s capital as basis. Surplus capital shall be paid back to partners and shortfall shall be paid in. YOU ARE REQUIRED TO: (A.) Prepare/Draw the capital account of the partners and the statement of financial position of Petu, Mika and Apele as at 31 December 2019?

QUESTION 1 Petu, Mika and Simon are in a partnership and share profits or losses in the ratio 3:2:1. Petu, Mika and Simon received salaries of N$120 000, N$100 000 and N$80 000 respectively as well as 10% interest on the opening balance of their capital. Petu received an entertainment allowance of N$20 000. Apele is the general manager. PMS PARTNERSHIP Statement of financial position as at 31 December 2019 ASSETS N$ N$ Non-current assets Land and building 420 000 Vehicles 100 000 Total non-current assets 520 000 Current assets Inventories 10 000 Receivables 50 000 Cash and cash equivalents 110 000 Total current assets 170 000 Total assets 690 000 EQUITY AND LIABILITIES Equity Capital: 420 000 Petu 200 000 Mika 120 000 Simon 100 000 Current account: 58 750 Petu 45 000 Mika (10 000) Simon 23 750 Total equity 478 750 Current liabilities Payables 211 250 Total equity and liabilities 690 000 Additional information: On 31 December 2019, Petu, Mika, and Simon decide to admit Apele as a partner on the following conditions: Admission of Apele will be effective as from 01 January 2020. Apele’s contribution consists of a vehicle with a carrying amount of N$50 000, inventories N$50 000 and cash N$104 000. The partners of the partnership, Petu, Mika and Simon, receive the same salaries and interest on capital as previously but Apele’s salary is reduced to N$40 000, and no bonus or others allowances are allowed in the partnership Petu, Mika, Simon and Apele. Apele receives 5% interest on capital. The abridged statement of income for the year ended 31 December 2019: N$ Services rendered 794 000 Salary: Apele (120 000) Bonus: Apele (72 000) Other expenses (60 000) Profit 542 000 Apele will receive 1/6 of the profit or losses and the profit sharing ratio of Petu, Mika and Simon will remain the same. On the same day Simon decides to withdraw from the partnership under the following conditions: Simon’s share must be divided amongst Petu, Mika and Apele in the ratio 1:2:2. Land and buildings are valued at N$780 000 only for the purpose of Simon’s withdrawal. Simon receives a cheque for his share of the partnership. The new partners Petu, Mika and Apele’s capital accounts must be in profit sharing ratio by using Apele’s capital as basis. Surplus capital shall be paid back to partners and shortfall shall be paid in. YOU ARE REQUIRED TO: (A.) Prepare/Draw the capital account of the partners and the statement of financial position of Petu, Mika and Apele as at 31 December 2019?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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QUESTION 1

Petu, Mika and Simon are in a partnership and share profits or losses in the ratio 3:2:1. Petu, Mika and Simon received salaries of N$120 000, N$100 000 and N$80 000 respectively as well as 10% interest on the opening balance of their capital. Petu received an entertainment allowance of N$20 000. Apele is the general manager.

PMS PARTNERSHIP

Statement of financial position as at 31 December 2019

ASSETS	N$	N$
Non-current assets
Land and building		420 000
Vehicles		100 000
Total non-current assets		520 000

Current assets
Inventories		10 000
Receivables		50 000
Cash and cash equivalents		110 000
Total current assets		170 000
Total assets		690 000

EQUITY AND LIABILITIES
Equity
Capital:		420 000
Petu	200 000
Mika	120 000
Simon	100 000
Current account:		58 750
Petu	45 000
Mika	(10 000)
Simon	23 750
Total equity		478 750
Current liabilities
Payables		211 250
Total equity and liabilities		690 000

Additional information:

On 31 December 2019, Petu, Mika, and Simon decide to admit Apele as a partner on the following conditions:

Admission of Apele will be effective as from 01 January 2020.
Apele’s contribution consists of a vehicle with a carrying amount of N$50 000, inventories N$50 000 and cash N$104 000.
The partners of the partnership, Petu, Mika and Simon, receive the same salaries and interest on capital as previously but Apele’s salary is reduced to N$40 000, and no bonus or others allowances are allowed in the partnership Petu, Mika, Simon and Apele. Apele receives 5% interest on capital.
The abridged statement of income for the year ended 31 December 2019:

	N$
Services rendered	794 000
Salary: Apele	(120 000)
Bonus: Apele	(72 000)
Other expenses	(60 000)
Profit	542 000

Apele will receive 1/6 of the profit or losses and the profit sharing ratio of Petu, Mika and Simon will remain the same.

On the same day Simon decides to withdraw from the partnership under the following conditions:

Simon’s share must be divided amongst Petu, Mika and Apele in the ratio 1:2:2.
Land and buildings are valued at N$780 000 only for the purpose of Simon’s withdrawal.
Simon receives a cheque for his share of the partnership.
The new partners Petu, Mika and Apele’s capital accounts must be in profit sharing ratio by using Apele’s capital as basis. Surplus capital shall be paid back to partners and shortfall shall be paid in.

YOU ARE REQUIRED TO:

(A.) Prepare/Draw the capital account of the partners and the statement of financial position of Petu, Mika and Apele as at 31 December 2019?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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