- 20 Marks
FA – Aug 2022 – L1 – Q2 – Non-current assets and depreciation | Preparation of Partnership accounts
Preparation of ledger accounts for office equipment and disposal, calculation of profit due to a partner, and preparation of an appropriation account and current accounts for partners.
Question
a) The following Statement of Financial Position extract has been taken from the accounts of Yamfo Ltd as at 31 December 2020:
| Non-current Assets | Cost (GHȼ) | Accumulated Depreciation (GHȼ) | Net Book Value (GHȼ) |
|---|---|---|---|
| Office Equipment | 172,800 | 92,100 | 80,700 |
During the year ended 31 December 2021, the following transactions took place in relation to Office Equipment.
Disposals:
| Equipment | Disposal Date | Purchase Date | Original Cost (GHȼ) | Disposal Proceeds (GHȼ) |
|---|---|---|---|---|
| Equipment 1 | 31 March 2021 | 1 January 2018 | 22,000 | 4,000 |
| Equipment 2 | 30 June 2021 | 1 January 2017 | 30,000 | 5,100 |
Additions:
| Equipment | Date of Addition | Cost (GHȼ) |
|---|---|---|
| Equipment 3 | 1 October 2021 | 35,000 |
Depreciation for Office Equipment is charged using the straight-line method based on a five-year life and an estimated residual value of 10% of the original cost. Depreciation is applied from the date the Office Equipment was bought until it was sold. All transactions were by cheque.
Required:
i) Prepare the Office Equipment ledger account for the year ended 31 December 2021.
(2 marks)
ii) Prepare the Disposal of Office Equipment ledger account for the year ended 31 December 2021.
(4 marks)
b) The following balances are in the books of a partnership as at 31 December 2021:
| Account | Amount (GHȼ) |
|---|---|
| Capital accounts Badu, as at 1 January 2021 | 500,000 |
| Tawiah, introduced 1 July 2021 | 300,000 |
| Drawings | Amount (GHȼ) |
|---|---|
| Badu | 220,000 |
| Tawiah | 100,000 |
Additional information:
- Until 30 June 2021, Badu had run the business as a sole trader. Tawiah joined him on 1 July 2021, introducing capital of GHȼ300,000.
- Under the partnership agreement, the balance of profit is to be shared between Badu and Tawiah in the ratio 3:2. No interest is to be charged on drawings. Both partners are to receive interest on their capital account balances at 5% per annum. Tawiah is to receive a salary of GHȼ40,000 per annum, but no salary is to be paid to Badu.
- The profit for the year ended 31 December 2021 was GHȼ330,000. It was agreed that this profit had accrued one-third in the six months ended 30 June 2021 and two-thirds in the six months ended 31 December 2021, except for an irrecoverable debt of GHȼ30,000 charged in arriving at the profit, which was to be regarded as occurring in the six months ended 30 June 2021.
Required:
i) Calculate the amount of profit due to Badu for the six months to 30 June 2021.
(2 marks)
ii) Prepare the Appropriation Account for Badu and Tawiah for the six months ended 31 December 2021.
(6 marks)
iii) Prepare the Current Accounts for Badu and Tawiah for the year ended 31 December 2021.
(6 marks)
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