Mercy, Nelly and Olive are in partnership sharing profits and losses equally after allowing for interest...

 

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Mercy, Nelly and Olive 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 Nelly of $ 60 per month. The trial balance of the partnership as at 30 September 2020 was as follows. Sales Inventory (1 October 2019) Purchases Operating expenses Loan from: Nelly Olive Land Building Plant and machinery (cost) Accumulated depreciation (30 September 2020) Accounts receivable and accounts payable Bank overdraft Capital accounts: Mercy Nelly Olive Current accounts: Mercy Nelly Olive Drawings: Mercy Nelly Olive $ 9,000 30,900 19,200 3,000 15,000 21,000 12,000 900 1,200 600 112,800 $ 60,000 3,000 6,000 12,000 9,900 3,600 7,500 6,000 3,000 600 900 600 112,800 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 Mercy, Nelly and Olive respectively. • Salaries of $ 30 per month to Nelly and Olive. 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 Nelly and Olive 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. Mercy, Nelly and Olive 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 Nelly of $ 60 per month. The trial balance of the partnership as at 30 September 2020 was as follows. Sales Inventory (1 October 2019) Purchases Operating expenses Loan from: Nelly Olive Land Building Plant and machinery (cost) Accumulated depreciation (30 September 2020) Accounts receivable and accounts payable Bank overdraft Capital accounts: Mercy Nelly Olive Current accounts: Mercy Nelly Olive Drawings: Mercy Nelly Olive $ 9,000 30,900 19,200 3,000 15,000 21,000 12,000 900 1,200 600 112,800 $ 60,000 3,000 6,000 12,000 9,900 3,600 7,500 6,000 3,000 600 900 600 112,800 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 Mercy, Nelly and Olive respectively. • Salaries of $ 30 per month to Nelly and Olive. 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 Nelly and Olive 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.

Answer rating: 100% (QA)

SOLUTION To prepare the statement of profit and loss for the year ended September 30 2020 we can cal... View the full answer