Question

QUESTION 4 PARTNERSHIPS (20 MARKS)

REQUIRED

Use the information provided below to prepare the following:
4.1 Current Accounts section of the Statement of Changes In Equity for the year ended

29 February 2016. Use the following format: (16)

EXTRACT OF STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 29 FEBRUARY 2016

Current Accounts	Romeo		Juliet		Total
Balance at 28 February 2015
Net profit for the year
Interest on capital
Salaries
Bonus
Profit Share
Drawings
Balance at 29 February 2016

4.2 The Current Liabilities section of the Statement of Financial Position as at 29 February 2016. (4)

INFORMATION

The information given below was extracted from the accounting records of Shakespeare

Traders, a partnership business with Romeo and Juliet as partners.

Balances in the ledger as at 29 February 2016

	R
Capital: Romeo	500 000
Capital: Juliet	250 000
Current a/c: Romeo (01 March 2015)	50 000
Current a/c: Juliet (01 March 2015)	22 000
Drawings: Romeo	250 000
Drawings: Juliet	200 000
Loan: Avo Bank	200 000
Bank overdraft	5 000
Debtors control	25 000
Creditors control	40 000
Prepaid expenses	4 000
Income received in advance	3 000

00 9

CR DR

The following must be taken into account:

1. (a) The net profit for the year ended 29 February 2016 amounted to R600 000.

2. (b) The partnership agreement makes provision for the following:

• Interest on capital must be provided at 10% per annum on the balances in the capital accounts for the

  first six months of the financial year. The interest rate increases to 12% per annum for the last six

  months of the financial year.

• The partners are entitled to the following monthly salaries:

  Romeo R15 000

  Juliet R18 000

• Romeo is entitled to a special bonus equal 80% of his monthly salary.

• Romeo and Juliet share the remaining profits or losses equally.

(c) R30 000 of the loan from Avo Bank will be repaid in the next financial year.

Answer 1

4.1	Current Accounts	Romeo	Juliet	Total
	Balance at 28 february 2015	50,000	22,000	72,000
	Net profit for the year	300,000	300,000	600,000
	Interest on capital	67,500	37,500	105,000
	Salaries	180,000	216,000	396,000
	Bonus	12,000	-	12,000
	Profit Share	96,000	96,000	192,000
	Drawings	250,000	200,000	450,000
	Balance at 29 February 2016	305,500	327,500	633,000
4.2	Current Liabilities	Amount
	Capital: Romeo	500,000
	Capital: Juliet	250,000
	Loan: Avo Bank	200,000
	Bank overdraft	5,000
	Creditors control	40,000
	Income received in advance	3,000