- Tam, Tim, Tom, and Pan are in partnership sharing profits in the ratio 6:4:3:2. Their partnership agreement includes: i. Interest on capital is at 13% per annum. ii. Salary to Tom $ 5,000 and Pan $ 8,500 per annum. iii. Interest on drawings is at 5% per annum. iv. The interest rate on the loan by Tam is 6% per annum. Net profit for the year ended 31 December 2019 was $ 50,000. Assume interest on loan by Tom has been deducted from this amount. Capital balances as of 31 December 2020 were Tam $ 45,000, Tim $ 30,000, Tom $25,000, and Pan $ 15,000. For current accounts balances allocation for Tam $ 12,000, Tim $ 5,000, Tom $ (4,000) and Pan($2,000). Loan from Tam $ 10,000. Drawings by the partners during the year were: i. Tam $ 10,000 ii. Tim $ 9,000 iii. Tom $ 8,500 iv. Pan $ 7,000 Required: 1) Prepare appropriation account. 2) Prepare capital account. 3) Prepare current accounts. 4) Prepare a net asset calculation. 5) Prepare balance sheet as of 31 December 2020. 6) Show all the interest rate calculations on the answer sheet.
- Tam, Tim, Tom, and Pan are in partnership sharing profits in the ratio 6:4:3:2. Their partnership agreement includes: i. Interest on capital is at 13% per annum. ii. Salary to Tom $ 5,000 and Pan $ 8,500 per annum. iii. Interest on drawings is at 5% per annum. iv. The interest rate on the loan by Tam is 6% per annum. Net profit for the year ended 31 December 2019 was $ 50,000. Assume interest on loan by Tom has been deducted from this amount. Capital balances as of 31 December 2020 were Tam $ 45,000, Tim $ 30,000, Tom $25,000, and Pan $ 15,000. For current accounts balances allocation for Tam $ 12,000, Tim $ 5,000, Tom $ (4,000) and Pan($2,000). Loan from Tam $ 10,000. Drawings by the partners during the year were: i. Tam $ 10,000 ii. Tim $ 9,000 iii. Tom $ 8,500 iv. Pan $ 7,000 Required: 1) Prepare appropriation account. 2) Prepare capital account. 3) Prepare current accounts. 4) Prepare a net asset calculation. 5) Prepare balance sheet as of 31 December 2020. 6) Show all the interest rate calculations on the answer sheet.
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.
Question
- Tam, Tim, Tom, and Pan are in partnership sharing profits in the ratio 6:4:3:2. Their
partnership agreement includes:
i. Interest on capital is at 13% per annum.
ii. Salary to Tom $ 5,000 and Pan $ 8,500 per annum.
iii. Interest on drawings is at 5% per annum.
iv. The interest rate on the loan by Tam is 6% per annum.
Net profit for the year ended 31 December 2019 was $ 50,000. Assume interest on loan by
Tom has been deducted from this amount. Capital balances as of 31 December 2020 were Tam
$ 45,000, Tim $ 30,000, Tom $25,000, and Pan $ 15,000. For current accounts
balances allocation for Tam $ 12,000, Tim $ 5,000, Tom $ (4,000) and Pan($2,000).
Loan from Tam $ 10,000. Drawings by the partners during the year were:
i. Tam $ 10,000
ii. Tim $ 9,000
iii. Tom $ 8,500
iv. Pan $ 7,000
Required:
1) Prepare appropriation account.
2) Prepare capital account.
3) Prepare current accounts.
4) Prepare a net asset calculation.
5) Prepare balance sheet as of 31 December 2020.
6) Show all the interest rate calculations on the answer sheet.
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