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- 20 Marks
FA – Nov 2021 – L1 – SB – Q2 – Partnership Account
This question involves partnership accounting with a new partner's admission, requiring the preparation of the profit or loss appropriation account and partners' current accounts.
Question
Bala and Ade had been together in partnership for several years in plastic manufacturing, sharing profits and losses in the ratio of 3:2 after charging salaries of N3,000,000 p.a. each.
On September 1, 2020, Ngozi was admitted into the partnership on the following terms:
- That she paid N2,800,000 to the partnership as her capital contributions; and
- She would be entitled to a salary of N2,700,000 per annum and a 20% share of profits after charging all salaries.
Bala and Ade are to continue their old profit sharing ratios and Ngozi’s 20% share of profits is guaranteed at a minimum of N1,500,000 per annum by the old partners.
On December 31, 2020, the following balances were extracted from the partnership books of Bala, Ade, and Ngozi:
| Accounts | N’000 |
|---|---|
| Capital Accounts: | |
| Bala | 28,000 |
| Ade | 18,000 |
| Current Accounts: | |
| Bala | 4,800 |
| Ade | 2,000 |
| Ngozi | 2,800 |
| Revenue | 272,000 |
| Purchases | 190,000 |
| Wages | 20,000 |
| Salaries | 25,000 |
| General Expenses | 10,000 |
| Plant and Machinery | 25,000 |
| Motor Vehicles | 15,000 |
| Receivables | 20,000 |
| Telephone Expenses | 3,750 |
| Payables | 24,350 |
| Inventory January 1, 2020 | 15,000 |
| Allowances for Bad Debts | 1,500 |
| Bank Balance | 17,100 |
| Drawings: | |
| Bala | 6,600 |
| Ade | 5,000 |
| Ngozi | 1,000 |
Additional information:
- Allowances for doubtful debts should be maintained at 5% of receivables.
- Inventory at December 31, 2020, was valued at N12,000,000.
- Depreciation on plant and machinery is 20% per annum and on motor vehicles is 25% per annum.
You are required to: a. Prepare the statement of profit or loss and appropriation account for the year ended December 31, 2020, accounting for Ngozi on a pro-rata time basis. (12 Marks)
b. Prepare the partners’ current account for the same period. (8 Marks)
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- 20 Marks
FA – Nov 2021 – L1 – SB – Q2 – Partnership Account
This question involves partnership accounting with a new partner's admission, requiring the preparation of the profit or loss appropriation account and partners' current accounts.
Question
Bala and Ade had been together in partnership for several years in plastic manufacturing, sharing profits and losses in the ratio of 3:2 after charging salaries of N3,000,000 p.a. each.
On September 1, 2020, Ngozi was admitted into the partnership on the following terms:
- That she paid N2,800,000 to the partnership as her capital contributions; and
- She would be entitled to a salary of N2,700,000 per annum and a 20% share of profits after charging all salaries.
Bala and Ade are to continue their old profit sharing ratios and Ngozi’s 20% share of profits is guaranteed at a minimum of N1,500,000 per annum by the old partners.
On December 31, 2020, the following balances were extracted from the partnership books of Bala, Ade, and Ngozi:
| Accounts | N’000 |
|---|---|
| Capital Accounts: | |
| Bala | 28,000 |
| Ade | 18,000 |
| Current Accounts: | |
| Bala | 4,800 |
| Ade | 2,000 |
| Ngozi | 2,800 |
| Revenue | 272,000 |
| Purchases | 190,000 |
| Wages | 20,000 |
| Salaries | 25,000 |
| General Expenses | 10,000 |
| Plant and Machinery | 25,000 |
| Motor Vehicles | 15,000 |
| Receivables | 20,000 |
| Telephone Expenses | 3,750 |
| Payables | 24,350 |
| Inventory January 1, 2020 | 15,000 |
| Allowances for Bad Debts | 1,500 |
| Bank Balance | 17,100 |
| Drawings: | |
| Bala | 6,600 |
| Ade | 5,000 |
| Ngozi | 1,000 |
Additional information:
- Allowances for doubtful debts should be maintained at 5% of receivables.
- Inventory at December 31, 2020, was valued at N12,000,000.
- Depreciation on plant and machinery is 20% per annum and on motor vehicles is 25% per annum.
You are required to: a. Prepare the statement of profit or loss and appropriation account for the year ended December 31, 2020, accounting for Ngozi on a pro-rata time basis. (12 Marks)
b. Prepare the partners’ current account for the same period. (8 Marks)
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