CSEC: May 2018, Question #4

No. 4(a): Workings for preparation of the appropriation account of Benji and Nicka:
Calculation of interest on capital:

1. Benji = $160,000 x 10% = $16,000.
2. Nicka = $140,000 x 10% = $14,000

  
Calculation of interest on drawings:

1. Benji = $6,000 x 5% = $300
2. Nicka = $4,300 x 5% = $215

  
Calculation of share of profit using ratio of 3:2:
Remaining profits = (56,200 + 300 + 215) – (16,000 +14,000 + 5,000) = $21,715
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1. Benji = $21,715 x 3/5 = $13,029
2. Nicka = $21,715 x 2/5 = $8,686

Now that all of the workings has been completed the Appropriation Account.

Preparation of the Appropriation Account of Benji and Nicka:

No. 4(b): Preparation of the Current Account of the partners for the year ended 31st December 2017:

No. 4(c): Calculation of the partnership’s return on investments for the year ended 31st December 2017:
 
Return on investment =   ___Net Profits      x 100 =              56,200           x 100 = 18.74%
                                             Capital Employed               (160,000 + 140,000)

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