Hosea, Riziki and Zarika are trading as Horizon enterprises. They share
Shs. |
Shs. |
|
Sales Opening stock Purchases Closing stock Gross profit Less: Salaries Repairs and maintenance Interest Mortgage repayment Insurance Auditee Legal fee Equipment purchase Rent and rates Net profit |
300,000 4,000,000 (600,000) 900,000 100,000 480,000 198,000 142,000 200,000 384,220 315,780 100,000 200,000 18,0000 |
8,000,000
(3700,000) 4,300,000 (3,200,000) 1,100,000 |
Additional information
1. Opening inventory and closing inventory were overvalued by 30%.
2. Included in interest expense is interest on capital to partners of Sh. 80,000. This amount was to be shared in the profit sharing ratio. The balance of interest relates to an overdraft taken by the partnership. 3. Mortgage repayment relates to Hosea for a loan obtained from a bank to acquire a residential house. 4. The legal fees of Sh. 100,000 relate to partners’ private legal issues,
5. Salaries include those paid to partners as follows: Hosea Sh.40, 000, Riziki Sh.60, 000 and Zarika Sh. 100,000. 6. Not included in the accounts were drawings of goods by Zarika costing Sh.40, 000.
7. Other income not included in the accounts is rental income Sh.500, 000 and dividend income from Ken-golden Cooperative Ltd. of Sh, 100,000.
Required
(i) A statement of adjusted taxable income for the year ended 31 December 2018
(ii) A schedule of the allocation of the taxable income to the partners.
(iii) Tax liability for each partner
Trending nowThis is a popular solution!
Step by stepSolved in 5 steps with 4 images
- XYZ & Co. Is a partnership firm consisting of Mr.X, Mr.Y and Mr.Z who shares profits and losses in the ratio of 2:2:1 and ABC Ltd. Is a company doing similar business. Following are the liabilities and assets of the firm and that of the company as at 31-3-2016: Liabilities XYZ & Co ABC Ltd. XYZ & Co. ABC Ltd. Plant & Machinery 5,00,000o 16,00,000 Furniture & Fixture 50,000 2,25,000 2,00,000 8,50,000 2,00,000 8,25,000 Equity Shares Capital: Equity Shares of 20,00,000 Stock in Trade Sundry Debtors Cash at Bank 10 each Partners Capital : 2,00,000 4,00,000 Y Cash in hand 40,000 1,00,000 3,00,000 1,00,000 General Reserve 10,00,000 7,00,000 Sundry Creditors 3,00,000 13,00,000 10,00,000 40,00,000 | 10,00,000 40,00,000 It was decided that the firm XYZ & Co. be dissolved and all the assets (except cash and cash at bank) and all the liabilities of the firm be taken over by ABC Ltd. by issuing 50,000 shares of $ 10 each at a premium of $ 2 per share. Partners of XYZz & Co. agreed to divide the…arrow_forwardThe following condensed balance sheet is for the partnership of Hardwick, Saunders, and Ferris, who share profits and losses in the ratio of 4:3:3, respectively: Cash Other assets Hardwick, loan Total assets $ 93,000 815,000 44,000 Beginning balances Sold assets $952,000 Accounts payable Ferris, loan Hardwick, capital Saunders, capital Ferris, capital Adjusted balances Max loss on remaining noncash assets Paid liabilities Safe payments Total liabilities and capital The partners decide to liquidate the partnership. Forty percent of the other assets are sold for $125,000. Prepare a proposed schedule of liquidation at this point in time. (Amounts to be deducted should be entered with a minus sign.) HARDWICK, SAUNDERS, AND FERRIS Proposed Schedule of Liquidation Cash Other Assets $ 48,000 54,000 380,000 240,000 230,000 $952,000 Accounts Payable Hardwick, Loan and Capital Saunders, Capital Ferris, Loan & Capitalarrow_forwardThe statement of financial position of PRUTZ Partnership as of December 31, 2017 show the following balances before they decided to liquidate Cash P 4,200; Receivable from Kahel P5,000; Other Assets P200,000; Liabilities P 75,000; Apol, Capital P60,000; Kahel, Capital P50,000; Santol, Capital P24,200. Profit and Loss ratio were divided in the ratio 30%, 30% and 40% to Apol, Kahel and Santol respectively. The Other Assets were sold in 4 equal installment with gain (loss) on realization amounting to (P14,000), P0, (P47,000) and P45,000 respectively during the months of January, February, March and April 2018. For the first installment-sale of the other assets, the cash available distributed to the partners the book value of the assets sold per instalment amounted to: for the 3rd instalment-sale of the assets, the other assets were sold for: capital interest of Kahel amounted to: loss absorption capacity of Kahel amounted to final distribution of Cash available Apol…arrow_forward
- Profit and loss sharing ratio is 5:3:2 respectively. The partnership will be liquidated Sale of non-cash assets having a book value of P120,000 for P90,000 less P2,000 over an estimated period of three months. As the assets are realized and liabilities Kuok is the only solvent partner. The following are the activities for the month of June: laquidated, distribution will be made to the partners as soon as there is cash available. hquidation expenses. One half of the liabilities were paid. Cash withheld for future 14. The Leisure Resort, a health spa, decided to dissolve the partnership when its financial position showed the following Credit Debit P 40,0) 210,000 Cash Other Assets Accounts Payable Kuok, Capital Tong, Capital Lau, Capital P 60,000 48,000 72,000 70,000 P250,000 P250,000 liquidation proccedings was estimated at P3,000 b) Support with a schedule of safe payment considering. 1 Partners' interests (capital plus loan balance) 2. Computation of restricted interest for potential…arrow_forwardPrice, Waterhouse, and Coopers complete their first year of business as a partnership. The partners offer auditing, tax, and advisory services. Use the Tableau Dashboard to determine allocation of income. Select Industry → _A__B_ __C_ Owner Initial Investments Waterhouse Price $250,0... $225,0... $200,0... $175,0... $150,0... $125,0... $100,0... $75,000 $50,000 $25,000 revenue Revenues 带+ableau Coopers Advisory services Auditing revenue Tax services revenu Owner Withdrawals Price Waterhouse Coopers $0 $1,000 $2,000 $3,000 $4,000 Expenses Salaries expense Advertising expense Insurance expense Rent expense Supplies expense ņ 回 1. For Industry C, compute the partnership's net income. 2. For Industry C, determine each partner's share of income assuming the partners did not agree on a plan and therefore share income equally.arrow_forwardPartnership A, B and C is a law firm. You have been engaged as accountant to prepare financial statements for the year ended Dec. 31, 2019 Partnerships profits are alllocated based fist on salaries,then on interest on opening capital balances then on fixed ratio. Salary allocation amount are A $100000 B $100000 C $160000 Opening capital balances A $70000 B $60000 C $70000 Interest rate is: 5% Fixed ratio is A 3 B 2 C 5 required Prepare year end adjusting entries Allocate partnership profit or loss to each partner Prepare adjusting entry and complete trial balnce Prepare income statement and statement of partners capital for the year ended Dec. 31, 2019 and a balance sheet for Dec.31arrow_forward
- The ledger of Tyler Lambert and Jayla Yost, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 20Y3: Lambert and Yost Trial Balance December 31, 20Y3 Debit Balances Credit Balances Cash 34,000 Accounts Receivable 47,800 Supplies 2,000 Land 120,000 Building Accumulated Depreciation-Building Office Equipment Accumulated Depreciation-Office Equipment Accounts Payable Salaries Payable Tyler Lambert, Capital Tyler Lambert, Drawing Jayla Yost, Capital Jayla Yost, Drawing 157,500 67,200 63,600 21,700 27,900 5,100 135,000 50,000 88,000 60,000 Professional Fees 395,300 Salary Expense Depreciation Expense-Building 154,500 15,700 Property Tax Expense 12,000 Heating and Lighting Expense Supplies Expense Depreciation Expense-Office Equipment Miscellaneous Expense 8,500 6,000 5,000 3,600 740,200 740,200 The balance in Yost's capital account includes an additional investment of $10,000 made on April 10, 2OY3. (Continued)arrow_forwardThe Pen, Evan, and Torves Partnership has asked you to assist in winding-up its business affairs. You compile the following information: 1. The partnership's trial balance on June 30, 20X1, Is Cash Accounts Receivable (net) Inventory Plant and Equipment (net) Accounts Payable Pen, Capital Evan, Capital Torves, Capital Total Profit and loss percentages Preliquidation capital balances Loss absorption potential (capital balances / loss percent) Decrease highest LAP to next highest: Debit $ 6,800 30,000 22,000 99,700 Decrease LAPS to next highest: $ 158,500 2. The partners share profits and losses as follows: Pen, 50 percent; Evan, 30 percent; and Torves, 20 percent. 3. The partners are considering an offer of $108,000 for the firm's accounts receivable, Inventory, and plant and equipment as of June 30. The $108,000 will be paid to creditors and the partners in Installments, the number and amounts of which are to be negotiated. Required: Prepare a cash distribution plan as of June 30,…arrow_forwarda. Prepare a profit distribution account for the year ended 31 October 2021. b. Prepare the partners' current accounts (in columnar form) for the year to 31 October 2021. c. (Note: All the figures must be rounded up to the nearest RM) note i need the answer in full format thank youarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education