Reference no: EM133006989

Peter and John are in a partnership sharing profits and losses in the ratio 1:2 respectively. The following balances were extracted from the trial balance of this business as at 31st December 2020:

£'000'

Building (cost £. 300 million) 200,000
Fixtures at cost 44,000
Provision for Depreciation on fixtures 13,200
Accounts Receivables 64,972
Accounts Payables 44,600
Cash at Bank 2,708
Opening inventory 167,916
Sales 494,600
Purchases 341,664
Carriage outwards 5,152
Discount allowed 460
Bank Loan interest 16,000
Office expenses 9,664
Salaries and wages 75,668
Irrecoverable debts 2,012
Allowance for receivables 1,600
5 year 12% Bank loan 16,000
Capital Accounts: Peter 140,000
: John 116,000
Current accounts: Peter 5,224
: John 1,192
Drawing Accounts: Peter 25,600
: John 22,600

Additional information

• Inventory on 31st December 2020 amounted to £ 225,360,000
• Office expenses £ 384,000 and wages £ 800,000 are to be accrued at the end of the year
• Fixtures are depreciated at 10% reducing balance basis while buildings are depreciated at 10% on straight-line basis
• Allowance for receivables to be adjusted to £ 1,280,000
• Peter draws a salary of £ 3,200,000 p.a. while partners capital attracts interest at 5% p.a.
• Partners drawings are charged interest at the rate of 5% p.a. in the year they are drawn.

Required

Problem 1: Prepare a Statement of profit or loss for the year ended 31st December 2020

Problem 2: Prepare a statement of financial position as at the same date