Title: Rono, Wambulwa and Nora have been trading in partnership asYouandi Enterprises sharing profits and ... Post by: Mugo on Jul 23, 2018 Rono, Wambulwa and Nora have been trading in partnership asYouandi Enterprises sharing profits and losses in the ratio of 2:2:1 respectively. They have presented the following profit and loss account of the firm for the year ended 31 December 2017:
Sh.000 Sh.000 Gross profit 24,800 Investment income (gross) 450 Miscellaneous income 315 25,565 Deduct: Depreciation 110 Office expenses 1,568 Legal fees 360 Sundry 630 Trade expenses 380 Partners’ salaries, interest on 13,350 (16,398) Capital and drawings Net profit 9,167 Additional information 1. Investment income comprises: sh.000 Interest on bank deposits 210 Dividend on shares in quoted companies 130 Interest charged on partners’ drawings: Rotich 50 Mambo 40 Nora 20 450 2. Miscellaneous income comprises: Sh.000 Gain on sale of furniture and fittings 195 Insurance recoveries for stolen stock 120 3. Office expenses comprise: 315 Sh.000 Advertisements on billboards 250 Rent 800 General expenses (allowable) 518 1,568 4. Legal fees include sh.150,000 incurred on a successful defense of a partner in a private legal suit. 5. Sundry expenses comprise: Sh.000 Donations to watoto orphanage 420 Debt recovery charges 90 Vehicle maintenance costs 120 6. Trade expenses comprise: 630 Subscriptions to a trade association Sh.000 150 Value Added Tax (VAT) paid 170 Repairs to building 60 380 7. Partners’ salaries, interest on capital and drawings are analysed below: Rono Wambulwa Nora Total Sh.000 Sh.000 Sh.000 Sh.000 Salaries 4,000 4,500 3,700 12,200 Interest on capital 200 300 330 830 Drawings 60 100 160 320 4,260 4,900 4,190 13,350 8. Capital allowances for the year ended 31 December 2017 were agreed with the tax authority at sh.480,000. Required: (a) Adjusted partnership profit or loss for the year ended 31 December 2017. (12 Marks) (b) Distribution of the adjusted profit or loss amongst the partners. (4 Marks) (c) The tax liability for each of the partners for the year ended 31 December 2017 (4 Marks) |