1.1. Since Vilander receives the same percentage interest on capital as Louw, we can calculate Louw's interest on capital first:
Louw's interest on capital = R35,200
Louw's capital contribution = R440,000
Louw's interest on capital = (35,200 / 440,000) x 100% = 8%
Therefore, Vilander's interest on capital is also 8%.
1.2. Current Account for Vilander:
Balance b/d (1 March 20.22) (credit) 65,000
Add: Salary 10,000 x 9 months + Salary increase 2,500 x 3 months = 97,500
Add: Interest on capital (660,000 x 8%) = 52,800
Less: Drawings 33,000
Less: Interest on drawings (33,000 x 5% x 12/12) = 1,650
Balance c/d (28 February 20.23) = 181,650
Current Account for Louw:
Balance b/d (1 March 20.22) (debit) 15,200
Add: Salary 144,000
Add: Interest on capital (440,000 x 8%) = 35,200
Less: Drawings 259,000
Less: Interest on drawings (259,000 x 5% x 12/12) = 6,475
Balance c/d (28 February 20.23) = (80,475)
1.3. Statement of Changes in Equity on 28 February 2023:
Opening Capital:
Vilander 660,000
Louw 440,000
Net Profit: 140,000
Remaining profit (after primary distribution):
Vilander's share = 660,000 / (660,000 + 440,000) x 140,000 = 84,000
Louw's share = 440,000 / (660,000 + 440,000) x 140,000 = 56,000
Add: Vilander's profit share 84,000
Add: Louw's profit share 56,000
Less: Drawings:
Vilander 33,000
Louw 259,000
Closing Capital:
Vilander = 660,000 + 84,000 - 33,000 = 711,000
Louw = 440,000 + 56,000 - 259,000 = 237,000
Information:
Extract from the accounting records on 28 February 20.23:
R
Capital: Vilander 660 000
Capital: Louw 440 000
Current account: Vilander (1 March 20.22) (credit) 65 000
Current account: Louw (1 March 20.22) (debit) 15 200
Drawings: Vilander 33 000
Drawings: Louw 259 000
Fixed assets at carrying value 750 000
Fixed deposit: FNB (12% p.a.) 151 200
Inventory ?
Debtors' control 58 000
Allowance for bad debts 3 900
Loan: Diamond Bank 208 800
Creditors' control 85 300
Accrued income 9 500
Prepaid expenses (See Information (a).) ?
Cash and cash equivalents 6 000
Bank (overdraft) 55 400
Additional Information:
(a) Information relating to the partnership agreement:
Partners' salaries:
• Vilander received R10 000 per month. His salary was
increased by R2 500 per month from 1 December 20.22.
• Louw receives R144 000 per year.
Interest on capital:
• Louw will receive R35 200 for the year.
• Vilander receives the same % interest as Louw.
Interest on drawings:
• Interest is charged by the partnership on the amount of the
drawings withdrawn by each partner at 5% on the balance of
the respective drawings account at the end of the period.
Remaining profit (after the primary distribution):
• The remaining profit is distributed in the ratio of the capital
contribution at the end of the year.
• The net profit after the primary distribution was R140 000.
• The loan from Diamond Bank was originally received
on 1 March 20.21. The loan must be repaid in equal monthly
instalments over a period of 5 years.
• Interest is not capitalized and is up to date.
• Allowance for bad debts must be decreased by R200.
• Insurance includes an annual premium of R12 000 paid
for theperiod 1 October 20.22 to 30 September 20.23.
• Inventory is a balancing figure.
REQUIRED:
1.1. Calculate the percentage of interest on capital as per partnership
agreement. Note that there were no changes to the capital accounts during
the financial year.
1.2. Draw up the Current Account for each partner for the financial year ended.
1.3. Draw up the Statement of Changes in Equity on 28 February 2023. Show your
workings.
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1 answer