- 15 Marks
Question
Atsu, Baba, and Chawe are in partnership, providing management services, sharing profits in the ratio 5:3:2 after charging annual salaries of GH¢18,000 each. Current accounts are not maintained. On 30 June 2024, Atsu retired.
Dua was admitted on 1 July 2024 to the partnership and is entitled to 30% of the profits of the current partnership, with the balance being shared equally between Baba and Chawe.
The previous partnership trial balance as of 30 June 2024 was as follows:
| Description | GH¢ | GH¢ |
|---|---|---|
| Capital accounts – Atsu | 12,519 | |
| Capital accounts – Baba | 65,844 | |
| Capital accounts – Chawe | 33,618 | |
| Trade receivables | 138,615 | |
| Inventories at 1 July 2023 | 6,000 | |
| Operating expenses | 419,166 | |
| Investment | 300 | |
| Bank overdraft | 33,510 | |
| Trade payables | 52,218 | |
| Revenue | 565,296 | |
| Total | 663,543 | 663,543 |
Additional Information:
- Inventory remains at GH¢6,000.
- Full provision is required for an irrecoverable debt of GH¢3,450.
- Adjustments agreed by partners:
- The investment is to be included at GH¢4,500.
- Goodwill, which remains in the books, is valued at GH¢72,000.
- On 1 July 2024, GH¢30,000 due to Atsu was transferred to Dua. The balance due to Atsu is to be repaid over three years, commencing on 1 July 2024.
- Dua introduced cash of GH¢22,500 to the partnership.
Required:
i) Prepare the statement of profit or loss and appropriation account of the previous partnership for the year ended 30 June 2024 and a statement of financial position at that date. (9 marks)
ii) Prepare the statement of financial position for the current partnership as of 1 July 2024. (6 marks)
Answer
i) Atsu, Baba, and Chawe
Statement of Profit or Loss for the year ended 30 June 2024
| Description | GH¢ |
|---|---|
| Revenue | 565,296 |
| Less: Opening Inventory | (6,000) |
| Less: Operating Expenses (419,166 + 3,450) | (422,616) |
| Closing Inventory | 6,000 |
| Profit for the year | 142,680 |
Appropriation Account
| Description | GH¢ |
|---|---|
| Salaries – Atsu | (18,000) |
| Salaries – Baba | (18,000) |
| Salaries – Chawe | (18,000) |
| Total Salaries | (54,000) |
| Profit to be shared | 88,680 |
| Atsu (50%) | 44,340 |
| Baba (30%) | 26,604 |
| Chawe (20%) | 17,736 |
| Total Appropriation | 88,680 |
ii) Statement of Financial Position as at 30 June 2024
| Description | GH¢ |
|---|---|
| Non-current assets | |
| Investment | 300 |
| Current assets | |
| Inventory | 6,000 |
| Trade receivables (138,615 – 3,450) | 135,165 |
| Total Assets | 141,465 |
| Description | GH¢ |
|---|---|
| Capital Accounts | |
| Atsu (12,519 + 18,000 + 44,340) | 74,859 |
| Baba (-65,844 + 18,000 + 26,604) | (21,240) |
| Chawe (-33,618 + 18,000 + 17,736) | 2,118 |
| Total Capital | 55,737 |
| Current Liabilities | |
| Bank overdraft | 33,510 |
| Trade payables | 52,218 |
| Total Capital & Liabilities | 141,465 |
Statement of Financial Position as at 1 July 2024 (New Partnership)
| Description | GH¢ |
|---|---|
| Non-current assets | |
| Tangible – Investment | 4,500 |
| Intangible – Goodwill | 72,000 |
| Total Non-Current Assets | 76,500 |
| Current assets | |
| Inventory | 6,000 |
| Trade receivables | 135,165 |
| Total Current Assets | 141,165 |
| Total Assets | 217,665 |
| Description | GH¢ |
|---|---|
| Capital Accounts | |
| Baba | 1,620 |
| Chawe | 17,358 |
| Dua | 52,500 |
| Total Capital | 71,478 |
| Non-current Liabilities | |
| Loan Account – Atsu | 82,959 |
| Current Liabilities | |
| Overdraft (33,510 – 22,500) | 11,010 |
| Trade payables | 52,218 |
| Total Capital & Liabilities | 217,665 |
- Tags: Appropriation, Capital Accounts, Financial Position, Goodwill, Partnership, Profit or Loss
- Level: Level 1
- Uploader: Salamat Hamid