Paul Starr, George Lennon and Angela Narine are partners in the law firm Starr, Lennon and Narine. The firm's accountant, John Ringo, has been unable to perform his duties for the past month because of illness. You are a senior associate in the firm whom the partners recognise as having strong accounting and management expertise.

The partners have asked you to compute the accounting information set out in (1) below until Ringo is able to resume his duties.

The partners have also identified issues related to administration and management within the law firm which require attention. These are set out in (2) below.

You have been asked to prepare a report with the details specified in each area listed below.

1.

A.

At the commencement of the partnership, Paul contributed $250,000, George $150,000 and Angela introduced office furniture and computer equipment with market values of $70,000 and $30,000 respectively. In accordance with the terms of the partnership agreement, each partner would receive the following:

(i) interest on their initial capital introduced at the rate of 8% per annum;

(ii) salary allowances which were to be paid monthly to each of the partners as follows: Paul $10,000; George $8,000; and Angela $20,000; and

(iii) remaining profit or loss to be shared among Paul, George and Angela in the ratio 2:3:1.

For the financial year ended April 30, 2021, the partnership earned a net profit of $575,752.

The capital balances of each partner as of May 1, 2020 were as follows:

Paul Starr $482,378

George Lennon $317,503

Angela Narine $321,995

George and Angela withdrew the sums of $42,915 and $18,865 respectively during the financial year.

REQUIRED

The partners have requested you to determine the balance in the capital accounts as at April 30, 2021.

Answer rating: 100% (QA)

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