Chan and David were sole traders with the following assets and liabilities on 31 March 2009. | | Chan $ | David $ |---|---|--- | Intangible assets (goodwill) | 30000 | - | Non-current (fixed) assets | 23000 | 10000 | Inventory (stock) | 7000 | 5000 | Trade receivables (debtors) | 3000 | 4000 | Trade payables (creditors) | 5000 | 6000 | Cash (bank) | - | 2000 | Loans repayable within 12 months (bank overdraft) | 8000 | - | Capital | 50000 | 15000 On 1 April 2009 Chan and David formed a partnership, Newstart. They entered into the following agreement: 1 Intangible assets (goodwill) would not appear in the books of the new partnership. 2 No interest would be allowed on capital. 3 Interest would be charged on drawings at the rate of 5% of the balance at the end of the year. 4 Salaries would be paid at the rate of: Chan $8000 per annum and David $7000 per annum. 5 Profits and losses would be shared in the ratio Chan and David 2:1. REQUIRED

1. (a)Explain the term goodwill and give one example.[2]
2. (b)State two accounting principles (concepts) which supports goodwill not being included in the balance sheet of a business.
3. (c)Calculate the capital of each partner, Chan and David, after writing off the goodwill on 1 April 2009.
4. (c)(i)Chan[2]
5. (c)(ii)David[2]
6. (d)Prepare the balance sheet of Newstart at 1 April 2009.[6]
7. (e)The following information is available at the end of the first year of trading of Newstart on 31 March 2010. Profit for the year (net profit) $10250 Drawings Chan $15000 David $20000 REQUIRED (e) Prepare the profit and loss appropriation account for the year ended 31 March 2010.[5]