Shirley and Ken are in partnership, trading in the construction industry. The year end for the partnership business is 30 June.
You are the Assistant Accountant and have been asked by the Accountant to assist him in preparing the financial statements for the year ended 30 June 2011.
You have the following information about the partnership:
The partners are Shirley and Ken.
- Their capital account balances as at 1 July 2010 were:
- Shirley £32,000
- Ken £57,000
- Partner's current account balances as at 1 July 2010 were:
- Shirley £1,900 Cr
- Ken £400 Dr
- Partner's annual salaries:
- Shirley £7,500
- Ken £9,500
- Partners' interest on capital is charged at 3% per annum on the capital account balances at the start of the year and from when a new partner joins the partnership.
- Reeny was admitted to the partnership on 1 January 2011 when she introduced £25,500 into the business' bank account.
- The profit sharing ratio, effective until 31 December 2010 was:
- Shirley 45%
- Ken 55%
- The profit sharing ratio, effective from 1 January 2011 was:
- Shirley 40%
- Ken 45%
- Reeny 15%
- Goodwill was introduce into the partner's capital accounts at a valued of £27,500 and then eliminated on 1 January 2011.