Answers
| Workings: Appropriation statement for the year ended Dec.31, 2017 & 2018 | |||||
| 2017 | 2018 | ||||
| 2017 | 2018 | Net Income | 380000 | 440000 | |
| Interest on Capital | |||||
| Clarke(1000000*5%) | 50000 | ||||
| Dave (900000*5%) | 45000 | ||||
| Clarke(1006000*5%) | 50300 | ||||
| Dave (879000*5%) | 43950 | ||||
| Salaries | |||||
| Clarke | 75000 | 75000 | |||
| Dave | 75000 | 75000 | |||
| Share of remaining profits | |||||
| Clarke(6/10*135000) | 81000 | ||||
| Dave(4/10*135000) | 54000 | ||||
| Clarke(6/10*195750) | 117450 | ||||
| Dave(4/10*195750) | 78300 | ||||
| 380000 | 440000 | 380000 | 440000 | ||
| 380000-50000-45000-75000-75000=135000 | |||||
| 440000-50300-43950-75000-75000=195750 | |||||
| a&b. | |||||
| Partners' Capital account for the year ended Dec.31, 2017 | |||||
| Clarke | Dave | Clarke | Dave | ||
| Beginning balance | 1000000 | 900000 | |||
| Drawings during the Year | 75000 | 75000 | Share of rem.profits | 81000 | 54000 |
| Ending Balance | 1006000 | 879000 | |||
| 1081000 | 954000 | 1081000 | 954000 | ||
| Partners' Capital account for the year ended Dec.31, 2018 | |||||
| Clarke | Dave | Clarke | Dave | ||
| Beginning balance | 1006000 | 879000 | |||
| Drawings during the Year | 75000 | 75000 | Share of rem.profits | 81000 | 54000 |
| Ending Balance | 1012000 | 858000 | |||
| 1087000 | 933000 | 1087000 | 933000 | ||
| c. It is the compensation for the partners' capital & time provided,before sharing the profits. |
| Interest on capital lent by the partners as well as salary for the work done in the partnership business are met first , & the balance is distributed amongst the two in the agreed ratio of 6:4 |
| Journal entries | ||
| Account Titles | Debit | Credit |
| Dec 31,2017 | ||
| Income summary | 380000 | |
| Interest on Capital | 95000 | |
| (1000000*5%)+(900000*5%) | ||
| Partners' Salaries | 150000 | |
| (75000+75000) | ||
| Clarke's Capital a/c | 81000 | |
| (6/10*135000) | ||
| Dave's Capital a/c | 54000 | |
| (4/10*135000) | ||
| (Appropriation of Net income & allocation to Partners' Capital a/cs.) | ||
| Clarke's Capital a/c | 75000 | |
| Clarke's Drawings a/c | 75000 | |
| (Closure of Clarke's Drawings a/c) | ||
| Dave's Capital a/c | 75000 | |
| Dave's Drawings a/c | 75000 | |
| (Closure of Dave's Drawings a/c) | ||
| Dec 31,2018 | ||
| Income summary | 440000 | |
| Interest on Capital | 94250 | |
| (1006000*5%)+(879000*5%) | ||
| Partners' Salaries | 150000 | |
| (75000+75000) | ||
| Clarke's Capital a/c | 117450 | |
| (6/10*195750) | ||
| Dave's Capital a/c | 78300 | |
| (4/10*195750) | ||
| (Appropriation of Net income & allocation to Partners' Capital a/cs.) | ||
| Clarke's Capital a/c | 75000 | |
| Clarke's Drawings a/c | 75000 | |
| (Closure of Clarke's Drawings a/c) | ||
| Dave's Capital a/c | 75000 | |
| Dave's Drawings a/c | 75000 | |
| (Closure of Dave's Drawings a/c) | ||
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