Reference no: EM133030127

Question - Nana and Amidu after being called to bar, decided to start their own law firm, Special Prosecutor Chambers. They share profits and losses in the ratio of 3:2. The trial balance of their firm at 31st December, 2017 is given below:

GH¢ GH¢

Capital Account: Nana 82,000

Amidu 66,000

Current Account: Nana 8,300

Amidu 1,800

Drawings: Nana 18,000

Amidu 12,000

Provision for doubtful debts (31/12/16) 2,400

Purchases 508,200

Turnover 659,300

Loan: Amidu 6,500

Computers at Cost 58,000

Fittings at Cost 12,000

Provision for depreciation:

Computers 29,600

Fittings 5,700

Inventory (31/12/2016) 86,800

Cash balance 200

Office expenses 32,000

Vehicle expenses 19,800

Cost of motor car (02/01/2017) 8,000

Trade receivables 61,000

Trade Payables 21,000

Bank balance 2,700

Wages 36,800

Insurance 3,100

Discount Allowed 12,800

877,000 877,000

Additional Information:

1) Inventories as at 31st December 2015 was valued at GH¢131,900

2) Depreciation is charged on the written down value at 10% per annum for fittings, and 20% per annum for Computers and motor car.

3) Amidu extended the loan to the firm at 10% interest on 01/01/2016.

4) The annual rent of GH¢4,640 was still outstanding at the end of the year.

5) The partners are entitled to an interest on capital at 10% per annum and pay a 5% interest on drawings.

6) Amidu was entitled to a salary of GH¢ 1,200 since he was directly involved in management.

7) Bad debts of GH¢1,000 are to be written off, and a provision for doubtful debts to be adjusted to two and half percent of the remaining balance.

8) Insurance of GH¢350 has been paid in advance and wages of 1,850 was owed as of 31st December 2017.

Required - Prepare income statement, appropriation account and the statement of financial position as at 31st December 2017.