Patrick, Smith and Jones have been friends since high school. They have been operating a partnership business
Question:
Patrick, Smith and Jones have been friends since high school. They have been operating a partnership business - PSJ Electrical for the past five years. The partners are thinking of incorporating their business as a limited liability company as a means of accessing more capital for expansion purposes
The following trial balance was extracted from the books of the business at 31 December 2020:
PSJ Electrical
Trial Balance as at 31 December 2020
Sales
550000
Motor Van at cost
75000
Office Equipment
16800
Provision for Depreciation on Motor van
8400
Provision for Depreciation on office equipment
5400
Purchases
350380
Salaries and wages
36592
Stock: 31 January 2020
85700
Returns Inwards
13600
Carriage Inwards
6000
Bad debts
2468
Provision for bad debts
1460
General expenses
1890
Rent
5130
Insurance
4900
Motor expenses
7880
Creditors
65000
Debtors
90644
Cash at Bank
1332
Drawings:Patrick
25300
Smith
16834
Jones
12432
Current Accounts:Patrick
2780
Smith
1230
Jones
5072
Capital Accounts:Patrick
60000
Smith
32000
Jones
24000
754112
754112
The following notes are available:
1.Stock at 31 December 2021, $120,500
2.Salaries paid in advance $4600
3.insurance owing $380
4.Increase provision for bad debt to $1700
5.Annual salaries to Patrick $2400; Jones $1400
6.Interest on drawings 5% per annum
7.Interest on capital 10% percent
8.Depreciation on Motor van is 15 % per annum on the reducing balance method and office equipment 20% on cost.
(a) Prepare the following statements for the partnership for the year ended September 30, 2020
(1) Income statement for PSJ Electrical for the year ended December 31, 2020
(2) The profit and loss, appropriation account for the partnership
(3) The capital account for the partners
(4) The current account for the partners
(5) The Statement of financial position as at 31 December 2020
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