Tia and Sarna are partners in a trading enterprise.
Their trial balance on 31 December 2019 is shown below:
Tia and Sarna - Trial Balance at 31 December 2019
(the debit and credit figures appear in the exam paper)
Additional information:
1 Inventory at 31 December 2019 was valued at $5 165.
2 Depreciation on furniture is to be charged at 20% per annum using the straight-line method.
3 The insurance figure includes a payment of $2 160 for the 12 months from 1 July 2019 to 30 June 2020.
4 The partnership agreement states that interest on capital is 5% per annum, Tia is to receive a salary of $6 000 per annum and the remaining profits and losses are to be shared equally.
(a)[8]
Prepare the income statement for Tia and Sarna for the year ended 31 December 2019.
(b)[4]
Prepare the appropriation account for Tia and Sarna covering the year ended 31 December 2019.
(c)[4]
Prepare the current account for Sarna for the year ended 31 December 2019. Balance the account and carry the balance forward on 1 January 2020.
(d)[4]
Advise the partners on whether this transfer should go ahead. Support your answer by giving advantages and disadvantages.
Worked solution & mark scheme
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