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In: Accounting

Sian and Amin are in partnership sharing profits and losses 3:2 respectively. No drawings are allowed...

Sian and Amin are in partnership sharing profits and losses 3:2 respectively. No drawings are allowed but EACH partner receives an annual salary of $45 000. The partnership does not keep a full set of accounts. For the year ending 31 December 2015, the following information is provided:

Property, plant and equipment 1 500 000

Inventory at cost 137 500

Accounts receivable (net) 75 000

Accounts payable 195 000

Bank overdraft 24 800

Fixed capital: Sian 800 000

Amin 600 000

Current accounts: Sian ?

Amin ?

Additional information:

• All sales are on account and the accounts receivable represents one month of sales.

• Inventory at 31 December 2015 increased by 10% over the inventory at 01 January 2015.

• Gross profit and net profit is a constant 25% and 15% of sales respectively.

• Partners’ closing current account balances are assumed to be in the ratio 3:2.

(a) (i) Prepare a partnership Statement of Comprehensive Income for the year ended 31 December 2015 including as much detail as possible. [8 marks]

(ii) Prepare a partnership Statement of Changes in Owners’ Equity for the year ended 31 December 2015.

Solutions

Expert Solution

(i) Opeing Stock =$137500/110*100=$125000

Closing Stock=$137,500

Sale during the year=$75000*12

=$900,000

Gross Profit = $900,000*25%

=$225,000

Net Profit = $900,000*10%

= $90,000

Partner Salary =$45000 Each

Net Profit Transfer to Partner Capital acoount after Salary = Nil

Partner Income Details:

Sain Income details : Salary + Profit from Business

=$45000+$0

=$45000

Amin Income Details = Salary +Profit from Business

=$45000+$0

=$45000

(ii) Partnership Statement of Changes in Owners’ Equity for the year ended 31 December 2015

Sian Fixed Capital as on 31 December 2015= Fixed Capital+ Salary+ Profit from Business

=$800,000+$45000+$0

=$845,000

Amin Fixed Capital as on 31 December 2015= Fixed Capital+ Salary+ Profit from Business

=$600,000+$45000+$0

=$645,000

Partnership Statement of Changes in Owners’ Equity for the year ended 31 December 2015

Should be =Sain Fixed Capital: Amin Capital

=$845,000:$645,000

= 1.31:1

ekkarill92 answered 1 year ago

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