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Calculate the rate of return of all partners

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Question - Apply the concepts of basic partnership accounting.  On 1 January 2014, Mark, Derrick and Spencer entered into partnership contributing $360,000, $200,000 and $200,000 respectively and sharing profits in the ratio of 2:1:1. Derrick is to be allowed a salary of $40,000 per year. Interest on capital is to be allowed at 10% per annum. Mark and Spencer are entitled to receive a commission of $20,000. During the year, Derrick withdrew $36,000 and Mark $38,000; interest on the same being 12%. Profit in 2014 before the above-mentioned adjustments was $80,000. Spencer is to be allowed a salary of $35,000 per year.

Required - You are required to prepare the Profit and Loss Appropriation Account and the partner's capital Accounts and also calculate the rate of return of all partners. If the average rate of return for investment in the market is 15% advise them.

Reference no: EM132942665

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