Lanie, Justin and Adam are in partnership sharing profits and losses equally after allowing for interest on capital at the rates of 5% per annum to the partners and a salary to Justin of $ 60 per month.

The trial balance of the partnership as at 30 September 2020 was as follows. 

	$	$
Sales		60,000
Inventory (1 October 2019)	9,000
Purchases	30,000
Operating expenses	19,200
Loan from: Justin		3,000
Adam		6,000
Land	3,000
Building	15,000
Plant and machinery (cost)	21,000
Accumulated depreciation (30 September 2020)		12,000
Accounts receivable and accounts payable	12,000	9,900
Bank overdraft		3,300
Capital accounts:    Lanie		7,500
Justin		6,000
Adam		3,000
Current accounts:  Lanie	600
Justin		900
Adam		600
Drawings:   Lanie	900
Justin	1,200
Adam	600
	112,800	112,800

Additional information:

1. On 1 April 2020, the terms of the partnership agreement were changed. The new terms provided as follows:

• 
  
  • A profit-sharing ratio of 5:3:2 for Lanie, Justin and Adam respectively.
  • Salaries of $ 30 per month to Justin and Adam.
  • Interest on capital at the rate of 5% per annum.
  • For the purpose of the changes , goodwill was valued at $3,600 and was to be written off immediately while the land and buildings were valued at $6, 000 and $19,200 respectively.

2. Sales include a credit sale of $1,800 in respect of goods sold on the basis of confirmation by the customer. The goods had cost $600. As at 30 September 2020; the customer had not confirmed whether he would buy the goods.

3. Interest on the loans from Justin and Adam is to be charged at the rate of 10% per annum. This interest had not been paid as at 30 September 2020.

4. Closing inventory as at 30 September 2020 was valued at $ 7,200.

5. Unless where otherwise provided, the incomes and expenses accrued evenly throughout the year.

Required:

1. The statement of profit and loss for the year ended 30 September 2020.
2. Partners’ current accounts as at 30 September 2020.                    
3. Statement of financial position as at 30 September 2020.                        

Answer rating: 100% (QA)

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