A. Devine and Vicky are partners dealing in cosmetics and other assorted goods. They share profit and losses in ratio 3:2. The trial balance below was extracted from the books of the partners as at 31st December, 2020.
DR CR
Rent Expenses 400,000
Bank overdraft 100,000
Discount50,000 100,000
Turnover 2,100,000
Cost of Sales 700,000
Receivable 400,000
Patent 400,000
Stocks (31/12/2019) 150,000
Loan from Devine at 15% per annum 200,000
Land 900,000
Motor vehicle 600,000
Equipment 400,000
Provision for depreciation:
Motor vehicles 140,000
Equipment 240,000
Payable 300,000
Drawings:
Devine 70,000
Vicky 60,000
Capital Account:
Devine 500,000
Vicky 300,000
Current Account:
Devine 120,000
Vicky 30,000
Total 4,630,000 4,630,000
The following information is relevant:
i. Interest on loan from Devine had neither been paid nor provided for.
ii. Motor Vehicles and Equipment are to be depreciated at the rate of the 10% and 20% percent per annum respectively on the reducing balance methods.
iii. Rent expenses outstanding at 31/12/2000 amounted to GHc 50,000.
iv. Capital attracts interest of 10% per annum. Vicky is to be paid a monthly salary of GHc 3,000.
v. No interest is allowed or charged on current accounts or on drawings or on drawings.
You are required to prepare:
a. Income Statement ( 2.5 Marks)
b. Profit and Loss Appropriation Account (2.5 marks)
c. Partners current account (2.5 marks)
d. Statement of Financial Position as at 31/12/2000 (2.5marks)
B. Critically examining why businesses that are made up of two or more people coming together with the aim of making profit fail in Ghana. You are to support your answers with relevant examples. ( 20 Marks)
