Senter and Harf have prepared their draft Balance Sheet as at 30 June 2004 as follows. It
Question:
Senter and Harf have prepared their draft Balance Sheet as at 30 June 2004 as follows.
It has now been discovered that the following errors and omissions have been made.
1. Some fixtures and fittings were sold for $3500 in January 2004. These items had cost $15 000 and their net book value at 30 June 2003 was $4500. The sale proceeds were credited to the Fixtures and Fittings at Cost account. No further entries had been made in the books for this sale.
(The partnership provides for depreciation on the straight-line basis at a rate of 10% on the balance on the Fixtures and Fittings account at the end of each financial year.)
2. Interest at the rate of 10% per annum is to be provided on the long-term loan from Senter for the year ended 30 June 2004.
3. The accounts for the year ended 30 June 2003 included stock-in-trade at 30 June 2003 in the sum of $20 000. The correct value of the stock should have been $30 000. The partners have agreed that this error should be corrected in the partnership accounts.
4. The partners have decided that a provision for doubtful debts equal to 4% of the debtors should be provided in the accounts.
5. An adjustment should be made for the prepaid rent at 30 June 2004 in the sum of $750.
6. During the year ended 30 June 2004. Harf had taken goods costing $1075 for his personal use.
Further information
In addition to the interest allowed on Senter's loan, the partners are allowed interest at 10% per annum on their Capital account balances. The balance of profits and losses are divided between Senter and Harf in the ratio of 3: 2.
Required
Prepare a corrected Balance Sheet as at 30 June 2004 for the partnership.
Step by Step Answer:
To prepare a corrected Balance Sheet for the partnership as of June 30 2004 we need to adjust for the errors and omissions mentioned and apply the nec...View the full answer
