Matthew, Mark and Luke were in partnership sharing profits and losses in the ratio 5 : 3
Question:
Matthew, Mark and Luke were in partnership sharing profits and losses in the ratio 5 : 3 : 2, financial statements being made up annually to 30 June. Fixed capitals were to bear interest at the rate of 5 per cent per annum, but no interest was to be allowed or received on current accounts or drawings. Any balance on current accounts was to be paid at each year end.
Luke left the partnership on 30 September 20X2, but agreed to leave his money in the business until a new partner was admitted, provided interest at 5 per cent was paid on all amounts due to him.
John was admitted to the partnership on 1 January 20X3, providing capital of £2,000. It was agreed that the new profit-sharing ratio be Matthew 5, Mark 4, John 1, but Mark was to guarantee John an income of £3,000 per annum in addition to his interest on capital.
At 1 July 20X2 each partner had a fixed capital of £4,000.
Drawings during the year 20X2/20X3 were as follows:
Matthew.......................£750
Mark...........................£600
Luke...........................£220
John..............................£80
The profit for the year to 30 June 20X3 was £20,000, which may be assumed to have accrued evenly over that period. You are required to show:
a. the appropriation account;
b. the partners' current accounts for the year ended 30 June 20X3.
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
Step by Step Answer:
Introduction To Financial Accounting
ISBN: 978-0077138448
7th edition
Authors: Anne Marie Ward, Andrew Thomas