Tutorial Questions for Week 2 commencing 14 March 2022

Tutorial Q 1

Ray, Sally and Trent have been operating a partnership for several years. According to the terms of the partnership deed profits and losses are to be shared between Ray, Sally and Trent in the ratio of 4:4:2. Sally is to be allowed a salary of $24,000 per annum. Interest of 10% is allowed on the capital account balances outstanding as at the beginning of the financial year. No interest is allowed on current accounts. Interest at 10% is charged on drawings for the year irrespective of when the drawings were made. Interest of 10% is allowed on any loan made by the partners. The following balances have been extracted from the books of the partnership as at 1^st April 2019:

	$
Capital Accounts as at 1/4/2019:
Ray	40,000 Credit Balance
Sally	40,000 Credit Balance
Trent	20,000 Credit Balance
Current accounts as at 1/4/2019:
Ray	4,000 Credit Balance
Sally	18,000 Credit Balance
Trent	6,000 Debit Balance
Fixed Assets	160,000
Loan from Sally	80,000
Accounts Receivable	50,000
Stock 1/4/2019	10,000
Accounts Payable	74,000
Accumulated Depreciation on Fixed Assets	26,000
Bank	84,000
Provision for doubtful debts	8,000

A summary of business transactions for the year ended 31^st March 2020 is as follows:

	$
Cash Drawings:
Ray	10,000
Sally	6,000
Trent	2,000
Cash Expenses:
Utilities	24,000
Salaries	40,000
Rental	72,000
Maintenance	18,000
Other expenses	14,000
Cash sales	420,000
Credit sales	600,000
Cash purchases	180,000
Credit purchases	240,,000
Sales returns (from credit sales)	4,000
Purchases returns (from credit purchases)	6,000
Transportation cost related to purchases	8,000
Transportation costs for delivery of good to customers	4,000
Purchases discounts (for credit purchases)	8,000
Sales discounts (for credit sales)	2,000
Payments received from debtors	580,000
Payments made to creditors	260,000

The following additional information relates to the financial year end 31^st March 2020:

• Depreciation on fixed assets for the year ended 30/3/2020 is to be provided on a diminishing balance basis at the rate of 10% per annum.
• Stock as at 31/3/2020: Cost $30,000 and Net Releasable Value $28,000
• Rental expense is for 12 months commencing 1/12/2019.
• Allowance for doubtful debts is to be made at 4% of debtors outstanding as at financial year end.
• Bad debts to be written off is $4,000
• Utilities expenses for the month of March 2020 amounting to $4,000 were only expected to be settled in April 2020.

Required:

Tutorial Q 2

For this question you are required to use the adjusted trial balance in Tutorial Q1 above:

Required:

Prepare an income statement for the year ended 31^st March 2020 for the partnership of Ray, Sally and Trent.

Tutorial Q 3

For this question you are required to use the information in Tutorial Q1 and Q2 above:

Required:

Prepare a Profit and loss appropriation statement for the year ended 31^st March 2020 for the partnership of Ray, Sally and Trent.