Question

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.

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 2 years ago

Ahmad and Bilal carry on business in partnership, sharing profits and losses in the proportion of 2/3 and 1/3 respectively

Ahmad and Bilal carry on business in partnership, sharing profits and losses in the proportion of 2/3 and 1/3 respectively. The Balance Sheet at 31st December, 2006 was as follows:Rs.Rs.Ahmad's Capital15,000Plant and Machinery4,000Bilal's Capital10,000Stock22,000Creditors2,000Debtors15,000Bank Overdraft15,000Cash1,00042,00042,000They agreed to admit Saeed into partnership and give him 1/4 share in the profits on the following terms:(1) Saeed should bring Rs.3,000 for Goodwill and Rs.20,000 as Capital.(2) The plant and machinery to be reduced by 10 percent, and a provision to be created for...

Togbi and Mama were partners sharing profits and losses in the ratio 2:1 respectively. The following...

Togbi and Mama were partners sharing profits and losses in the ratio 2:1 respectively. The following trial balance was extracted from their books on 31st December, 2004 Details GH¢ GH¢ Capital Accounts: Togbi 14,000 Mama 7,000 Drawings Accounts: Togbi 3,400 Mama 2,200 Current Accounts: Togbi 700 Mama 500 Office equipment at cost 1,144 Stock in trade (1/1/2004) 10,000 Trade Debtors and creditors 8,100 6,175 Purchases and sales 76,000 102,000 Freehold property 9,250 Wages and salaries 12,727 Rates...

Balqees and Zawan were partners sharing the profits and losses of their partnership firm “ Best...

Balqees and Zawan were partners sharing the profits and losses of their partnership firm “ Best traders ” in the ratio of 5:6. As the duo were struggling with managing the ever increasing financial needs of their business and hence they decided to admit Hana in their partnership firm. Hana, a rich lady was drawn in to induce funds in the cash strapped business. She agreed to participate in the struggling venture demanding a 5/12 share in profits, which was...

Betta, Gretta and Jetta operate a partnership business sharing profits and losses in the ratio of...

Betta, Gretta and Jetta operate a partnership business sharing profits and losses in the ratio of 5:3:2. Their capital balances at the beginning of the year were $60,000, $40,000 and $30,000 respectively. For the year ending June 30, 2020 the following information is given to you. Net Income from operations $120,000 Salaries paid to Betta and Gretta were $500 per month. Jetta was paid a bonus of $5,000 for the year. All the partners were to receive interest on capital...

A and B were in partnership sharing profit and losses in the proportion of three fourth and one fourth respectively.

A and B were in partnership sharing profit and losses in the proportion of three fourth and one fourth respectively. Their balance Sheet stood as follows on 31st December 2003.LIABILITIES …….…….…. Rs.Creditors …………………....... 37,500Capital AccountA ……………………………......… 40,000B…………………………......……. 10,000TOTAL ……………….…… 87,500ASSETS …………….….. Rs.Cash at bank ………... 22,500Bill receivable……..…. 3,000Book debts…………..… 16,000Stock………..………….. 20,000Furniture………..…….. 1,000Building………..…….... 25,000TOTAL……………... 87,500They admitted C into partnership 1st January 2004 on the following terms:The C pays Rs. 10,000 as his capital for 1/5 share in the future profits.That goodwill for Rs. 20,000 is...

A, B are two partners sharing profits and losses in the ratio of 3:1

A, B are two partners sharing profits and losses in the ratio of 3:1. They admit K as a partner and he pays Rs. 30,000 as capital. The new ratio is to be 3:1:1. The goodwill of the firm is to be based on 3 years’ purchase of the average 4 years’ profits which are Rs. 15,000, 12,000, 18,000, 19,000.Required: Show the journal entries, if: (A) K pays for the goodwill in cash. (B) He is unable to bring the...

X and Y are partners sharing profits and losses in the ratio of 2:3 with capitals of Rs.2,00,000

X and Y are partners sharing profits and losses in the ratio of 2:3 with capitals of Rs.2,00,000 and Rs.3,00,000 respectively. On 1st October, 2017, X and Y granted loans of Rs.80,000 and Rs.40,000 respectively to the firm. Show distribution of profits/losses for the ended 31st March, 2018 in each of the following alternative cases:Case 1. If the profits before interest for the year amounted to Rs. 21,000.Case 2. If the profits before interest for the year amounted to t...

Peter, Matt, Priscilla, and Mary began the year in the PMPM General Partnership sharing profits, losses,...

Peter, Matt, Priscilla, and Mary began the year in the PMPM General Partnership sharing profits, losses, and capital equally. They each had a tax basis at the beginning of the year of $3,000, $10,000, $8,000, and $11,000 respectively. Early in the year, Mary provided general consulting services to the partnership and received an additional 15% profits, losses, and capital interest in the partnership. The liquidation value of her additional interest was $45,000. Later the same year, the partnership received cash...

Anna and Bess share partnership profits and losses at 60% and 40%, respectively. The partners agree...

Anna and Bess share partnership profits and losses at 60% and 40%, respectively. The partners agree to admit Cal into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Cal are: Anna (60%) $ 300,000 Bess (40%) 300,000 Total $ 600,000 Part 1: Prepare the journal entry(s) for the admission of Cal to the partnership, assuming Cal invested $400,000 for the ownership interest and that this is a fair price for that...

Quinn and Kinsella are in partnership, sharing profits in the ratio 60:40 respectively. €/£000 Non-current Assets...

Quinn and Kinsella are in partnership, sharing profits in the ratio 60:40 respectively. €/£000 Non-current Assets Property Motor Vehicles Current Assets 300 60 80 440 Capital Accounts Quinn Kinsella Current Accounts Quinn Kinsella 210 180 40 10 440 A new partner is being admitted to the partnership. Murphy will contribute €150,000, which will be split 80:20 between the capital and current accounts. The existing partners believe the goodwill of the partnership is valued at €60,000; they do not want to...