Ali and Sai are partners, and their financial year finishes on 30 June. Their partnership agreement contains the following provisions.
Interest on capital is to be allowed at 6% per annum.
Interest on drawings is to be charged at 5%.
Sai is to receive a partnership salary of $10050 per annum.
Ali and Sai divide residual profits and losses in the ratio 3:2.
Ali and Sai have supplied the following details:
Ali: Drawings for the year ended 30 June 2024 $11000; Capital at 1 July 2023 $60000; Current account at 1 July 2023 $1800 debit.
Sai: Drawings for the year ended 30 June 2024 $16000; Capital at 1 July 2023 $40000; Current account at 1 July 2023 $250 credit.
Profit for the year before interest on loan was $42700.
Ali advanced a loan of $10000 to the partnership at an interest rate of 5% per annum. The interest for the year ended 30 June 2024 has already been paid. There are no other loans in the partnership.
(a)[8]
Prepare the profit and loss appropriation account for the year ended 30 June 2024 on page 7.
(b)[8]
Prepare the capital and current accounts for Sai for the year ended 30 June 2024 and carry the balances down on 1 July 2024.
(c)[2]
State two disadvantages of trading as a partnership.
(d)[2]
Prepare the journal entry that records payment of the interest on the loan from Ali. No narrative is needed.
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