Question: Peele and Mellis conduct a merchanting business in partnership on the following terms:
(a) Interest is to be allowed on partners; capital accounts at 6 per cent per annum.
(b) Peele is to be credited with a partnership salary of £750 per annum.
(c) The balance of profit in any year is to be shared equally by the partners.
After preparing their Trading and Profit & Loss Account for the year ended 31st March, 1960, but before making any provision for Interest on Capital or for Peele's partnership salary, the following balances remained on the books:
It is agreed by the partners to reduce the book value of Goodwill by writing off £250 at 31st March, 1960 (to be charged to the Appropriation Section of the Profit and Loss Account). You are asked to prepare the Appropriation Section of the firm's Profit & Loss Account and the partners; current accounts for the year ended 31st March, 1960, together with the Balance Sheet as on that date.