Farah and Hana are in partnership. The partnership agreement states that they share profits and losses equally. Interest on capital is allowed at the rate of 4% per annum. Interest is charged on drawings made during the year at the rate of 5% per annum. No salaries are paid to the partners. The following balances were extracted from the books on 30 April 2015. $ Premises (cost) 60000 Delivery vehicles (cost) 30000 Office fixtures (cost) 15000 Provisions for depreciation Premises 3600 Delivery vehicles 10000 Office fixtures 11000 Trade payables 7900 Trade receivables 18750 Provision for doubtful debts 500 Bank overdraft 12200 Capital accounts: Farah 50000 Hana 30000 Current accounts at 1 May 2014: Farah 3250 Cr Hana 1850 Cr Drawings: Farah 6000 Hana 6000 Purchases 81250 Revenue 190000 Returns inwards 8600 Inventory at 1 May 2014 15600 Advertising expenses 11000 Wages and salaries 31450 Delivery vehicle expenses 14900 Heat and light 9750 Other operating expenses 12000 Additional information The following information was available 30 April 2015. 1 Inventory was valued at $13650. 2 Advertising expenses prepaid were $800. 3 Heat and light $150 was outstanding. 4 Depreciation is to be charged on all non-current assets owned at the end of the year as follows: Premises at the rate of 2% on cost per annum Delivery vehicles at the rate of 20% per annum using the diminishing (reducing) balance method Office fixtures at the rate of 10% per annum using the straight-line method. 5 The provision for doubtful debts is to be maintained at 4%. 6 A cheque payment of $550, made to a credit supplier on 15 April, had not been recorded in the books.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

1. [18] (a) Revenue 190000, Returns inwards (8600), Net Revenue 181400 (1)
2. [18] (a) Inventory 1 May 2014 15600, Purchases 81250, Total goods available 96850, Inventory 30 April 2015 (13650)
3. [18] (a) Cost of sales (83200) (1)
4. [18] (a) Gross profit 98200 (1)of
5. [18] (a) Less expenses: Other operating expenses 12000 (1)
6. [18] (a) Advertising (11000 – 800) 10200 (1)
7. [18] (a) Wages and salaries 31450 (1)
8. [18] (a) Delivery vehicle expenses 14900 (1)
9. [18] (a) Heat and light (9750 + 150) 9900 (1)
10. [18] (a) Depreciation: Premises 1200 (1)
11. [18] (a) Depreciation: Delivery vehicles 4000 (1)
12. [18] (a) Depreciation: Office fixtures 1500 (1)
13. [18] (a) Increase in Provision for doubtful debts 250 (1)
14. [18] (a) Total expenses (85400)
15. [18] (a) Profit for the year 12800
16. [18] (a) Add Interest on drawings: Farah 300 (1)
17. [18] (a) Add Interest on drawings: Hana 300 (1)
18. [18] (a) Total interest on drawings 600
19. [18] (a) Total distributable profit 13400
20. [18] (a) Interest on capital: Farah (2000) (1)
21. [18] (a) Interest on capital: Hana (1200) (1)
22. [18] (a) Total interest on capital (3200)
23. [18] (a) Remaining profit for appropriation 10200
24. [18] (a) Share of profit: Farah 5100 (1)of
25. [18] (a) Share of profit: Hana 5100 (1)of
26. [18] (a) Total share of profit 10200
27. [7] (b) Current accounts: Debit side: Drawings Farah 6000, Hana 6000 (1)
28. [7] (b) Current accounts: Debit side: Int on drawings Farah 300, Hana 300 (1)
29. [7] (b) Current accounts: Debit side: Balance c/d Farah 4050, Hana 1850 (1)
30. [7] (b) Current accounts: Credit side: Balance b/d Farah 3250, Hana 1850 (1)
31. [7] (b) Current accounts: Credit side: Int on capital Farah 2000, Hana 1200 (1)of
32. [7] (b) Current accounts: Credit side: Share of profit Farah 5100, Hana 5100 (1)of
33. [7] (b) Current accounts: Balance b/d Farah 4050, Hana 1850 (1)of
34. [15] (c) Non-current assets: Premises: Cost 60000, Depn to date 4800, NBV 55200 (1)of
35. [15] (c) Non-current assets: Delivery vehicles: Cost 30000, Depn to date 14000, NBV 16000 (1)of
36. [15] (c) Non-current assets: Office fixtures: Cost 15000, Depn to date 12500, NBV 2500 (1)of
37. [15] (c) Total NCA: Cost 105000, Depn to date 31300, NBV 73700 (1)
38. [15] (c) Current assets: Inventory 13650 (1)
39. [15] (c) Current assets: Trade receivables 18750 (1)
40. [15] (c) Current assets: Less Provision for doubtful debts (750) (1)
41. [15] (c) Current assets: Other receivables 800 (1)
42. [15] (c) Capital accounts: Farah 50000, Hana 30000, Total 80000 (1)
43. [15] (c) Current accounts: Farah 4050, Hana 1850, Total 5900 (1)of
44. [15] (c) Current liabilities: Trade payables (7900 – 550) 7350 (2)
45. [15] (c) Current liabilities: Other payables (Heat and light accrued) 150 (1)
46. [15] (c) Current liabilities: Bank overdraft (12200 + 550) 12750 (2)