A, B and C have been operating a partnership for several years. According to the terms of the partnership deed profits and losses are to be shared between A, B and C in the ratio of 4:4:2. B is to be allowed a salary of $54,000 per annum. The interest of 10% per annum is allowed on the capital account balances outstanding as at the beginning of the financial year. No interest is allowed on current account balances. Interest at 10% per annum is charged on drawings for the year irrespective of when the drawings were made. Interest of 10% per annum is allowed on any loan made by the partners. The following balances have been extracted from the books of the partnership as at 1^st January 2020:

	Dr	Cr
Capital Accounts as at 1st January 2020:
A		90,000
B		90,000
C		45,000
Prepaid Rent	40,500
Fixed Assets	262,500
Loan from B		180,000
Accounts Receivable	106,500
Accrued Utilities Expense		7,500
Inventory 1st January 2020	22,500
Term Deposits	75,000
Accounts Payable		166,500
Accumulated Depreciation on Fixed Assets		52,500
Interest Receivable	18,000
Bank	189,000
Service Revenue Received in Advance		28,500
Allowance for doubtful debts		18,000
Current Accounts as at 1 January 2020:
A		9,000
B		40,500
C	13,500
Total	727,500	727,500

A summary of business transactions for the year ended 31^st December 2020 is as follows:

	$
Cash Drawings:
A	22,500
B	13,500
C	4,500
Interest received in cash	6,000
Cash Expenses:
Utilities	54,000
Salaries	90,000
Rent	162,000
Maintenance	40,500
Other expenses	31,500
Cash sales	945,000
Credit sales	1,350,000
Cash purchases	405,000
Credit purchases	555,000
Sales returns (from credit sales)	9,000
Service revenue received in cash	109,500
Purchases returns (from credit purchases)	13,500
Transportation cost related to purchases (not paid)	18,000
Transportation costs for delivery of good to customers (not paid)	9,000
Purchases discounts (for credit purchases)	18,000
Sales discounts (for credit sales)	4,500
Payments received from debtors	1,305,000
Payments made to creditors	585,000

The following additional information relates to the financial year end 31^st December 2020:

• The partnership uses a periodic inventory system
• Interest on term deposits amounting to $1,500 for the year ended 31^st December 2020 has not been received.
• Depreciation on fixed assets for the year ended 31^st December 2020 is to be provided on a diminishing balance basis at the rate of 10% per annum.
• Service revenue received in cash includes an amount of $18,000 received in advance for services to be provided in January 2020.
• Inventory as at 31^st December 2020: Cost $67,500 and Net Releasable Value $63,000
• Rental expense is for 12 months commencing 1^st September 2020.
• Allowance for doubtful debts is to be made at 5% of debtors outstanding as at financial year end.
• Bad debts of $9,000 are to be written off.
• Utilities expenses for the month of December 2020 amounting to $9,000 were only settled on 4^th January 2021.
• Ignore GST.

Required:

1. Balance day journal adjustments in general journal form for the year ended 31^st December 2020.
2. A 10-column worksheet showing the unadjusted trial balance, balance day adjustments, adjusted trial balance, income statement items for the year ended 31^st December 2020 and balance sheet items as at 31^st December 2020.

3. prepare the Ledger accounts.

Answer rating: 100% (QA)

Part 1 Particulars Amount Amount Drawings by A Cash account 22500 22500 As account Interest account 2250 2250 Drawings by B account Cash account 13500 13500 Bs account Interest account 1350 1350 Drawi... View the full answer