Section A

Partnership Financial Statements

$20$ Marks

Question $1$

Study the scenario and complete the question that follows:

Mugg and Bean Partnership

Mugg and Bean are partners with a computer store trading as MB Computers. They share profits and losses in the ratio $4$:$3$ respectively.

On $28$ February $2019,$ the following list of balances were obtained from the company's financial records:

$\backslash$table$[[,],[$Land and buildings at cost$,300000],[$Office furniture at cost$,80000],[$Vehicles at cost$,75000],[$Accumulated Depreciation: office furniture,$26875],[$Accumulated Depreciation: Vehicles,$23750],[$Long$-$term loan $($Unsecured$),87500],[$Accounts receivable,$48000],[$Accounts Payable,$218750],[$Bank $($dr$),35500],[$Provision for credit losses,$5000],[$Accrued interest on loan,$4275],[$Net Income for the year $,104750,],[$Capital Mugg,$100000],[$Capital $,$ Bean,$75000],[$Current account: Mugg $($cr$)$ on $1$ March $2018,12500],[$Current account: Bean $($cr$)$ on $1$ March $2018,18750],[$Drawings: Mugg,$62500],[$Drawings: Bean,$37500],[$Inventory on hand,$1150],[$Stationary on hand,$37500]]$

Page $2$ of $14$

Additional information

A further $R500$ from accounts receivable must be written off as irrecoverable and a provision for credit losses must be maintained at $10\%$ of the outstanding accounts receivable balances.

The partnership agreement states the following:

Interest on $10\%$ per year is paid on fixed capitals.

Interest of $8\%$ per year is to be paid or charged on the opening balances of current accounts.

A bonus of $R7500$ is to be paid to Mugg.

Source: Waka, L$.2023.$

Required

Prepare the Statement of changes in equity to show the distribution $($appropriation$)$ of profits for MB Computers for the year ended $28$ February $2019.$

$(20$ Marks$)$