I Skip and U Jump sell toys. Their individual investments in the business on 1 January 20X4 were: Skip £80,000, Jump £40,000.

For the year to 31 December 20X4, the net profit was £30,000 and the partners’ drawings were: Skip £8,000, Jump £9,000.

For 20X4 (their first year), the partners agreed to share profits and losses equally, but they decided that from 1 January 20X5:

(i) The partners should be entitled to annual salaries of: Skip £10,000; Jump £14,000.

(ii) Interest should be allowed on capital at 7% per annum.

(iii) The profit remaining should be shared equally (as should losses)

Required:

Prepare the profit and loss appropriation accounts and the partners’ current accounts for the three years.

Transcribed Image Text:

20X5 20X6 Net trading profit before dealing with partners' items £ 38,000 29,000 Skip f 13,000 12,000 Drawings Jump £ 17,000 20,000