Chap 15: Sole trader and partnership

1. Alice and Betty are in partnership, sharing profits and losses in the ratio 2:1. Their year end is 30 June. On 1 January 20X4 Cath joined the partnership and the new profit sharing ratio became Alice 50%, Betty 30% and Cath 20%. The profit for the year ended 30 June 20X4 was £520,000, after charging an expense of £40,000 which related to the first six months of the year. The remainder of the profit accrued evenly over the year. What is Betty's total profit share for the year ended 30 June 20X4?

• A £173,333

• B £156,000

• C £164,666

• D £164,000

2. What is Olga's total share of the profit for the ysar ended 31.12.X5?

• A. £391,350

• B. £427,850

• C. £529,000

• D. £530,800

3. What is the closing balance on Mary's current account at 31.12.X5

• A. £390,500

• B. £391,350

• C. £506,350

• D. £541,350

4. Declan and Indiah are in partnership, sharing profits 3:2. On 1 July 20X4, Calum joins the partnership. Under the new partnership agreement profits will be shared by Declan, Indiah and Calum 5:3:2 respectively with the following annual salaries.  Indiah £40,000 pa  Calum £48,000 pa Profit accrues evenly over the year. The partnership profit at 31 December 20X4 was £450,000.

At 31 December 20X4 how should the profits be allocated?

Declan Indiah Calum

• A. £229,500 £165,900 £54,600

• B. £236,500 £160,900 £52,600

• C. £225,000 £135,000 £90,000

• D. £225,500 £164,300 £60,200

5. Billy and Charlie are in partnership together sharing profits equally. They each invested £20,000 and £30,000 respectively in the business and Billy later made a loan of £5,000 to the business. The loan is outstanding throughout the year to 31 March 20X6. Interest is charged on capital and loans at 5% per annum and is credited to current accounts. The balances on the partners' current accounts at 1 April 20X5 were £15,500 for Billy and £12,700 for Charlie. The partnership made a profit of £32,000 for the year ending 31 March 20X6, before accruing for any interest.

What is the balance on the partners' current accounts at 31 March 20X6?

Billy Charlie

• A £31,500 £28,700

• B £31,375 £28,825

• C £31,625 £28,825

• D £31,250 £28,950

6. Curtis and Sillett are in partnership, sharing profits 3:2 and preparing their accounts to 30 June each year. On 1 January 20X6, McAllister joined the partnership, and from that date the profit sharing ratio became Curtis 50%, Sillett 25% and McAllister 25%, after providing for salaries for Sillett and McAllister of £20,000 and £12,000 per annum respectively. The partnership profit for the year ended 30 June 20X6 was £480,000, accruing evenly over the year. What are the partners' total profit shares for the year ended 30 June 20X6?

Curtis Sillett MCAllister

• A £256,000 £162,000 £62,000

• B £26,8000 £168,000 £64,000

• C £264,000 £166,000 £66,000

• D £264,000 £156,000 £60,000

7. A partner's private petrol bills have been treated as part of the partnership's motor vehicle expenses. Which of the following journals corrects the error?

• A Debit Drawings account, Credit Motor vehicle expenses account

• B. Debit Motor vehicle expenses account, Credit Drawings account

• C. Debit Motor vehicle expenses account, Credit Capital account

• D. Debit Capital account, Credit Motor vehicle expenses account

8. How should interest charged on partners' drawings be dealt with in partnership financial statements?

• A Credited as income in the profit and loss account

• B Deducted from profit in allocating the profit among the partners

• C Added to profit in allocating the profit among the partners

• D Debited as an expense in the profit and loss account

9 Which of the following journals records interest earned on partners' capital account balances?

• A Debit Partners' current accounts, Credit Profit and loss appropriation account

• B Debit Profit and loss appropriation account, Credit Partners' current accounts

• C Debit Profit and loss appropriation account, Credit Cash at bank

• D Debit Profit and loss appropriation account, Credit Partners' capital accounts

10. Paula and Quinn are in partnership, sharing profits in the ratio 2:1. On 1 July 20X4 they admitted Paula's son Ryan as a partner. Paula guaranteed that Ryan's profit share would not be less than £25,000 for the six months to 31 December 20X4. The profit sharing arrangements after Ryan's admission were Paula 50%, Quinn 30%, Ryan 20%. The profit for the year ended 31 December 20X4 is £240,000, accruing evenly over the year. What should Paula's final profit share be for the year ended 31 December 20X4?

• A £140,000

• B £139,000

• C £114,000

• D £139,375