DISCUSSION QUESTIONS

7. Unlimited liability means that the creditors of a partnership have the

right to require each partner to be personally responsible for all debts
of the partnership.

Quick Study 11-2

Keeley Norton Total

Profit for the period $104,000

Salary allowances
Keeley ............................................... $30,000
Norton............................................. $40,000
Total salary allowances ..................... 70,000
Balance of income ................................ 34,000

Balance allocated equally

Keeley .................................................. 17,000
Norton.................................................. 17,000
Total allocated equally....................... 34,000
Balance of income ................................ ______ ______ 0
Shares of the partners $47,000 $57,000
Problem P11-5
1.
MISTERI AND NUSANTARA CO.
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
Gross profit $ 74,280
Decrease in provision for doubtful debts expense 1,280
75,560
Expenses
Salary ($28,800 - $5,000) $ 23,800
Rent expense 2,640
Insurance expense ($960 - $100) 860
Depreciation expense - Building (5% x $34,000) 1,700
- MV (10% x $29,200) 2,920
- F & F (10% x $19,600) 1,960 (33,880)
Profit for the period $ 41,680

2.
MISTERI AND NUSANTARA CO.
PROFIT AND LOSS APPROPRIATION
FOR THE YEAR ENDED 31 DECEMBER 2006
Profit (loss) for the period as per income statement $ 41,680
Interest on drawings
Misteri 432
Nusantara 115

Interest on capital
Misteri (1,500)
Nusantara (2,100)
Loan interest – Nusantara ($12,000 x 8% x 10/12) (800)

Salary
Misteri (9,000)

Commission
Nusantara (2,400)
$ 26,427
Capital/Current accounts – Share of profit (loss)
Misteri ($30,000/$72,000 x $26,427) $ 11,011
Nusantara ($42,000/$72,000 x $26,427) 15,416 $ 26,427
3.
Partner’s Current Account
Misteri
Date Description Amount Date Description Amount
Beginning balance $ 3,000 Interest on capital 1,500
Drawings 5,400 (5% x $30,000)
Interest on drawings 432 Salary 9,000
(8% x $5,400)
Salary 5,000 Profit 11,011
Ending balance $ 7,679
$ 21,511 $ 21,511

Nusantara
Date Description Amount Date Description Amount
Drawings $ 1,440 Beginning balance $ 1,200
Interest on drawings 115 Interest on capital 2,100
(8% x $1,440) (5% x $42,000)
Ending balance 17,961 Interest on loan 800
Profit 15,416
$ 19,516 $ 19,516
4.
MISTERI AND NUSANTRA CO.
BALANCE SHEET
AS AT 31 DECEMBER 2006
ASSETS
Non-current assets
Furniture and Fittings $ 19,600
Accumulated depreciation – F & F ($1,960 + $1,960) (3,920) $ 15,680

Building 34,000
Accumulated depreciation – B ($3,400 + $1,700) (5,100) 28,900

Motor vehicles 29,200

Accumulated depreciation – MV ($2,920 + $2,920) (5,840) 23,360
Total non-current assets $ 67,940

Current assets
Cash $ 3,600
Bank 17,800
Accounts receivable $ 20,000
Provision for doubtful debts (5% x $20,000) (1,000) 19,000
Inventory 18,000
Prepaid insurance 100
Total current assets $ 58,500

Total assets $ 126,440

EQUITY AND LIABILITIES

Equity
Capital – Misteri $ 30,000
- Nusantara 42,000
Current - Misteri 7,679
- Nusantara 17,961
Total equity $ 97,640
Non-current liabilities
Loan – Nusantara $ 12,000
Total non-current liabilities $ 12,000

Current liabilities
Accounts payable $ 16,800
Total current liabilities $ 16,800
Total liabilities $ 28,800
Total equity and liabilities $ 126,440