Q3a)

Waters and Wilcox

Schedule of Profit Distribution at 30 June 2006
$ $
Profit available for distribution 45,900

Add Interest on Drawings - Waters 200

(2,000x0.1)
- Wilcox 800 1,000
(8,000x0.1)

Less Interest on advance (10,000x0.07) (700)

Less Salaries - Waters 40,000

- Wilcox 60,000 (100,000)

Less Interest on capital - Waters 3,000

(60,000x0.05)
- Wilcox 6,000 (9,000)
(120,000x0.05)
(62,800)

3b)
General Journal
Dr Cr
Interest on advance – Wilcox 700
Interest on advance payable – Wilcox 700
Profit and loss Summary 700
Interest on advance – Wilcox 700
Interest on Advance

Profit and loss Summary 9,000

Current – Water (60,000 x 0.05) 3,000
Current – Wilcox (120,000x 0.05) 6,000
Transfer of Interest on Capital

Profit and loss Summary 100,000

Current – Water 40,000
Current – Wilcox 60,000
Transfer of Salary Entitlement

Current – Water (2,000x0.1) 200

Current – Wilcox (8,000x0.1) 800
 Profit and loss Summary 1,000
Recording Interest being charged on drawings

Current – Water (62,800 x 0.4) 25,120

Current – Wilcox (62,800 x 0.6) 37,680
Profit and loss Summary (45,900-700-9,000- 62,800
100,000+1,000)
Transfer of Profit Share

Current – Water 35,000

Current – Wilcox 42,000
Salary – Waters 35,000
Salary – Wilcox 42,000
Transfer of Salary Withdrawn

Current – Water 2,000

Current – Wilcox 8,000
Drawings – Waters 2,000
Drawings – Wilcox 8,000
Transfer of Drawings
3c)
Current – Waters
2006 $ 2006 $
Balance 7,000 Profit and loss (Interest on 3,000
Capital)
Profit and Loss (Interest on Drawings) 200 Profit and Loss (Salary) 40,000
Profit and Loss (Profit) 25,120
Profit and Loss (Salary Withdrawn) 35,000
Profit and Loss (Drawings) 2,000 Balance 26,320
69,320 69,320

Current – Wilcox
2006 $ 2006 $
Profit and Loss (Interest on Drawings) 800 Balance 33,000
Profit and Loss (Profit) 37,680 Profit and loss (Interest on 6,000
Capital)
Profit and Loss (Salary Withdrawn) 42,000 Profit and Loss (Salary) 60,000
Profit and Loss (Drawings) 8,000
Balance 10,520
99,000 99,000

3d)
Waters and Wilcox
Balance Sheet as at 30 June 2006 (extract)
$ $
Owners Equity
Capital – Waters 60,000
plus Current – Waters (26,320) 33,680

Capital – Wilcox 120,000

plus Current – Wilcox 10,520 130,520
164,200

3e)

Waters and Wilcox

Statement of Change in Equity for the year ended 30 June 2006
Waters Wilcox Total
$ $ $
Equity at 1 July 2005
Opening balance of capital 60,000 120,000 180,000
Contributions 0 0 0
Closing balance of capital 60,000 120,000 180,000
Opening balance of current account (7,000) 33,000 26,000
Interest on Partners’ Capital 3,000 6,000 9,000
Partners’ Salaries 40,000 60,000 100,000
Interest on Drawings (200) (800) (1,000)
Share of Remaining Profit (25,120) (37,680) (62,800)
Profit Appropriated 10,680 60,520 71,200

Less: Salary Withdrawn (35,000) (42,000) (77,000)

Drawings (2,000) (8,000) (10,000)

Closing Balance of Current Account (26,320) 10,520 (15,800)

Equity at 30 June 2006 33,680 130,520 164,200