4. Terry and Thomas are in partnership sharing profits and losses 2:1. They had originally invested...

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4. Terry and Thomas are in partnership sharing profits and losses 2:1. They had originally invested €50,000 and €40,000, respectively. Their current account balances on 1 January 2015 were €14,000 credit for Terry and €9,900 debit for Thomas. The partnership agreement specifies the following: 1) The payment of interest on drawings and receipt of interest on capital at the rate of 5% per annum and 3% per annum, respectively. 2) The partners take drawings in the same proportion as they share profits or losses. Terry takes drawings of €2,400 a month with Thomas taking the amount of drawings as allowed by the partnership rules. Thomas is entitled to take a salary of €2,000 a month. 3) 4) The interest on drawings is calculated as if the drawings for the six month period had been taken in full on the first day of the period. On 1 July 2015, Terry decides to retire. Both partners agree to have the partnership valued and bring in the resultant goodwill into the partnership. Terry agrees to leave €30,000 of his capital as a loan to the business earning interest at the rate of 4% per annum and to withdraw the balance of what is owing to him. An independant expert values the goodwill on 1 July at €90,000. On 1 July, Thomas decides to enter a new partnership with Toby where they share profits or losses 3:1. They decided to keep the same interest rates from the previous partnership agreement in relation to drawings and capital. Thomas's salary was changed to €2,200 a month. From this period to the year-end, Thomas took drawings of €10,000 and Toby took drawings of €5,000. Toby introduced capital of €25,000 on his admission to the partnership. The goodwill was cancelled in the same proportion as they share profits or losses. The profits for the year amounted to €108,000 and these profits occurred evenly throughout the year. REQUIREMENT: For the year ended 31 December 2015: (a) Prepare the Profit & Loss Appropriation Accounts. (b) Post to and balance the Current Account of all the individual partners. (12 Marks) (8 Marks) [Total: 20 Marks] 4. Terry and Thomas are in partnership sharing profits and losses 2:1. They had originally invested €50,000 and €40,000, respectively. Their current account balances on 1 January 2015 were €14,000 credit for Terry and €9,900 debit for Thomas. The partnership agreement specifies the following: 1) The payment of interest on drawings and receipt of interest on capital at the rate of 5% per annum and 3% per annum, respectively. 2) The partners take drawings in the same proportion as they share profits or losses. Terry takes drawings of €2,400 a month with Thomas taking the amount of drawings as allowed by the partnership rules. Thomas is entitled to take a salary of €2,000 a month. 3) 4) The interest on drawings is calculated as if the drawings for the six month period had been taken in full on the first day of the period. On 1 July 2015, Terry decides to retire. Both partners agree to have the partnership valued and bring in the resultant goodwill into the partnership. Terry agrees to leave €30,000 of his capital as a loan to the business earning interest at the rate of 4% per annum and to withdraw the balance of what is owing to him. An independant expert values the goodwill on 1 July at €90,000. On 1 July, Thomas decides to enter a new partnership with Toby where they share profits or losses 3:1. They decided to keep the same interest rates from the previous partnership agreement in relation to drawings and capital. Thomas's salary was changed to €2,200 a month. From this period to the year-end, Thomas took drawings of €10,000 and Toby took drawings of €5,000. Toby introduced capital of €25,000 on his admission to the partnership. The goodwill was cancelled in the same proportion as they share profits or losses. The profits for the year amounted to €108,000 and these profits occurred evenly throughout the year. REQUIREMENT: For the year ended 31 December 2015: (a) Prepare the Profit & Loss Appropriation Accounts. (b) Post to and balance the Current Account of all the individual partners. (12 Marks) (8 Marks) [Total: 20 Marks]

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