Reference no: EM133112910
Question - Meenie, Miney and Mo are in partnership and use method 1 (the variable capital method) for accounting for the equity in the partnership. At 30th June 2022 the balances in the capital and drawings accounts of each partner were as follows:
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Partner's name
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Capital balance
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Partner's name
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Drawings balance
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Meenie
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$80,000
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Meenie
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$120,000
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Miney
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$160,000
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Miney
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$120,000
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Mo
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$320,000
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Mo
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$40,000
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The partnership agreement states:
1. Meenie is to receive a salary of $46,000 per year.
2. Miney is to receive a salary of $28,000 per year.
3. Interest of 12% p.a. on capital contributions.
4. Interest on drawings at 16% p.a.
Additional Information:
1. The partnership agreement does not specify profit-sharing ratios.
2. The partnership made a profit of $492,800 for the year ended 30th June, 2022.
3. Meenie and Miney each withdrew $24,000 on 30 September 2021, $16,000 on 31 December 2021, $10,000 on 31 March 2022, and the remainder on 30 June 2022.
4. Mo made his drawing on 30 June 2022.
Required -
a. Prepare the Profit Distribution Statement to allocate the profit for the year ending 30th June, 2022.
b. Prepare an extract from the Statement of Financial Position to show the Equity balances for Meenie, Miney and Mo.
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