QUESTION 4 The information given below was extracted from the accounting records
ID: 2438842 • Letter: Q
Question
QUESTION 4 The information given below was extracted from the accounting records of Salmon Traders, a partnership business with Sally and Monty as partners. The financial year ends on the last day of February each year REQUIRED Prepare the following accounts in the General ledger of Salmon Traders: 4.1 Current a/c: Monty (Balance the account.] 4.2 Appropriation account (Close off the account.) PARTNERSHIPS (20) (13) INFORMATION Balances in the ledger on 28 February 2017 Capital: Sally Capital: Monty Current afe: Sally (01 March 2016) Current a/c: Monty (01 March 2016) Drawings: Sally Drawings: Monty 400 000 200 000 20 000 (DR) 33 000 (CR 200 000 180 000 The following must be taken into account la) The net profit according to the Profit and Loss account amounted to R500 000 on 28 February 2017 b) The partnership agreement makes provision for the following Interest on capital must be provided at 15% per annum on the balances in the capital accounts. Note. Sally increased his capital by R100 000 on 01 September 2016. Monty decreased his capital by R100 000 on the same date. The capital changes have been recordedExplanation / Answer
Required - 4.2
Appropriation Account
(1) The residual profit is obtained as 500,000 - total interest of 86250 = 413.750.
(2) In the absence of agreement on profit sharing ratio among the partners, such residual profit to be share equally .. Hence 413,750 * 1/2 = 206,875 each partner.
(3) Interest amounts are computed as under
Required - 4.1
Current account : Monty
Note ....... Check if profit sharing ratio is missing in the question. Otherwise, residual profit can be shared equally. Comment if you find more information. I can edit the solution accordingly.
Hope the above work helped you ....... good day
Sally Monty Dr Cr R R R R Profit for Year 500000 Interest on capital (W-1) 52500 33750 86250 Residual Profit 206875 206875 413750 Totals 259375 240625 500000 500000