27 Jun URQUHART AND KERNAGHAN
Urquhart and Kernaghan are in partnership sharing profits and losses in proportion to capital invested. Their capital account balances on 1 January Year 2 were
Urquhart £30,000 and Kernaghan £20,000. Their partnership agreement also stated that: • • Interest on capital will be paid at 5% per annum. nterest on drawings
will be charged at 2% per annum. The partners have I agreed maximum drawings of 20% of capital per annum. Both partners have withdrawn the maximum this year. A
salary of £1,000 per month is payable to Urquhart. rquhart receives 6% interest per annum on a loan of £25,000 he has made to U the partnership.
• •
The profit for the year (net profit) ending 31 December Year 2 was £26,000.
(a) Prepare the appropriation account of Urquhart and Kernaghan for year ending 31 December Year 2. (b) Calculate Urquharts current account balance at 31
December Year 2. The balance of his current account at 1 January Year 2 was £2,150 Dr. At the start of Year 3 Urquhart and Kernaghan agree to admit Sanderson as a new
partner under the following conditions. • Sandersons capital contribution is to be £14,000. • Goodwill is to be valued at £3,600.
Goodwill is to be written off. • R evaluation of non-current assets (fixed assets) shows a loss of £5,400 prior to Sandersons admission. • S anderson is
to receive 25% of any future profits. Urquhart and Kernaghans original profit-sharing ratio is to remain the same. (c) State the new profit-sharing ratio.
(d) Calculate the new capital account balances for each partner.
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