QUESTION 2 [25 marks]

James, Brian and Sarah decided to enter into a partnership business starting from 1 April 2017. On that date:

1. James and Brian contributes RM50,000 and RM90,000 cash respectively, while Sarah contributed a motor vehicle valued at RM70,000.
2. As an active partner, Brian will received monthly salary of RM1,500 commencing on 1 July 2017.
3. Sarah gave loan of RM10,000 to the partnership on 1 November 2017.

4) Any profit or loss of the firm will be shared between them as provided under Section 26 of Partnership Act 1961. However James will be guaranteed a minimum profit of RM300 per month and any deficiency will be borne by Brian.

5) All partners are entitled for interest on capital contribution of 6% per annum.

6) Interest at 8% per annum will be charge on partners drawings.

During the year ended 31 March 2018:

1. The net profit of the partnership before deducting depreciation expenses was RM49,117. It is the business policy to depreciate all tangible noncurrent assets at 20% per annum, based on yearly basis.

2. James withdrew cash RM4,000 and RM2,500 on 1 August 2017 and 1 January 2018 respectively.

3. Sarah withdrew cash RM2,000 on 1 December 2017.

On 31 March 2018, James died in an accident and the amount due to the deceased partners estate was paid in cash. The following events took place upon his death:

1. Motor vehicle was revalued to RM40,000.

2. Inventories were reduced by RM5,000.

3. Profits or loss will be shared between James and Brian in the ratio of 2:1.

4. It was agreed that the rate of interest on drawing was to remain the same while interest on capital will be based on closing capital balance at the rate of 10% per annum.

Required:

Prepare the following accounts:

1. Revaluation account.

[5 marks]

2. Appropriation account for the year ended 31 March 2018.

[11 marks]

3. Partners capital account in columnar form.

[4marks]

4. Partners current account in columnar form.

[5 marks]

[Total: 25 marks]