QUESTION 2Three good friends from a primary school in Taiping in 1970’s met during a school reunion held in Kula Lumpur. They are all now having good job except for Joe who has been retrenched due to the relocation of the employer’s plant from Malaysia to Cambodia. Sehar and Hock Seng decided to help Joe by forming a business partnership to operate a restaurant called Kita Punya Warong (KPW). On 1 April 2020, KPW started its operation with the following capital investment structure: Joe(RM)Sehar(RM)Hock Seng(RM)Cash-30,00050,000Vehicle10,00015,000-Equipment20,00015,00020,000 Additional information:Interest on cash capital investment is 10% while any withdrawals made are charged at 5% per annum respectively.Joe was given a salary of RM2,500 until end of 2020. Starting from January 2021, he received a salary of RM3,000 per month.On 1 January 2021, both Sehar and Hock Seng withdrew cash RM10,000 and RM15,000 respectively from KPW.KPW’s first year operation has recorded a net profit of RM144,000.Joe, Sehar and Hock Seng agreed to share KPW’s profit and loss based on 2:3:5 ratio. REQUIRED: (a) Prepare the journal entry to record the partners’ initial investments in KPW. Omit the explanation. (b) Prepare the profit and loss appropriation of KPW for the year ended 31 March 2021.

SOLUTION A JOURNAL IS A COMPANY'S OFFICIAL BOOK IN WHICH ALL TRANSACTIONS ARE RECORDED IN…

Answered: Three good friends from a primary…

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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QUESTION 2

Three good friends from a primary school in Taiping in 1970’s met during a school reunion held in Kula Lumpur. They are all now having good job except for Joe who has been retrenched due to the relocation of the employer’s plant from Malaysia to Cambodia. Sehar and Hock Seng decided to help Joe by forming a business partnership to operate a restaurant called Kita Punya Warong (KPW).

On 1 April 2020, KPW started its operation with the following capital investment structure:

	Joe (RM)	Sehar (RM)	Hock Seng (RM)
Cash	-	30,000	50,000
Vehicle	10,000	15,000	-
Equipment	20,000	15,000	20,000

Additional information:

Interest on cash capital investment is 10% while any withdrawals made are charged at 5% per annum respectively.
Joe was given a salary of RM2,500 until end of 2020. Starting from January 2021, he received a salary of RM3,000 per month.
On 1 January 2021, both Sehar and Hock Seng withdrew cash RM10,000 and RM15,000 respectively from KPW.
KPW’s first year operation has recorded a net profit of RM144,000.
Joe, Sehar and Hock Seng agreed to share KPW’s profit and loss based on 2:3:5 ratio.

REQUIRED:

(a) Prepare the journal entry to record the partners’ initial investments in KPW. Omit the explanation.

(b) Prepare the profit and loss appropriation of KPW for the year ended 31 March 2021.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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