Reference no: EM132716914
Question: Derek and Rose formed a partnership 1st July 2019. Capital invested by Derek amounted to $144,000.
• Capital invested by Derek amounted to $96,000.
• For the year ended 30 June 2020, the partnership earned a profit of $164,820.
• Derek advanced a loan of $48,000 to the partnership on 1st January 2020. Interest on advance is calculated at the rate of 12% per annum.
• On 31st December 2019, Derek withdrew $15,000 in drawings and Rose withdrew $20,000
The partnership agreement states:
• Derek is to receive a salary of $30,000 per annum, and Rose $45,000
• Interest is to be calculated on the partners' fixed capital at 10% per annum.
• Interest is to be calculated on the partners' drawings at 10% per annum.
• Residual profit or loss will be split in the proportion of two-thirds to Derek and one-third to Rose.
Required: a) Prepare the profit distribution schedule for distributing the profits to the partners for the year ending 30 June 2020 (round to the nearest dollar).
b) Prepare the Equity section of the Balance Sheet using the fixed capital accounts method.
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