Gregory and Simpson share profits in a proportion of 60:40. Gregory is entitled to a salary allowance

Question:

Gregory and Simpson share profits in a proportion of 60:40. Gregory is entitled to a salary allow¬ance of $60 000 p.a., and Simpson is entitled to $50 000 p.a. Capitals are fixed at Gregory $72 000 and Simpson $48 000. Interest is to be calculated on partners’ capital, advances, and drawings in excess of salary at 8% p.a. The trial balance after the determination of profit for the 6-month period is shown below.

Gregory had withdrawn $12 000 cash on 1 April; Simpson’s cash drawings included $24 000 on 1 March and $12 000 on 1 May.

Required
Prepare:

1. The Profit Distribution account for 6 months ended 30 June 2016.

2. The Retained Earnings accounts for each partner at 30 June 2016.

3. A balance sheet as at 30 June 2016.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...

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