Question 1
Spain Enterprises (a sole trader) has the following financial items for the year ended 31 December.
| Accounts payable | 14,800 | Drawings for the year | 27,100 |
| Accounts receivable | 13,000 | Expenses owing | 2,960 |
| Additional capital contributed during the year | 5,000 | Insurance expense | 1,950 |
| Advertising expense | 6,800 | Internet expense | 1,200 |
| Capital at the start of the year | 66,470 | Petrol expense | 5,780 |
| Cash | 14,900 | Rent expense | 12,500 |
| Motor Vehicle | 48,000 | Service revenue | 42,000 |
Calculate the following items in the table below: SHOW ALL WORKINGS
| Total expenses for year ended 31 December |
Profit for year ended 31 December |
| |
|
| Total Assets as at 31 December | Total Liabilities as at 31 December |
| |
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| Total Owners Equity as at 31 December | Verify that Owners Equity is correct |
| |
Question 2
Pat and Karl agree to form a partnership on 1 March 2018 to supply first-aid kits to motor vehicle dealers. They agree on the following market values given to them by an independent valuer:
Pat’s contribution: Cash $10,000; Inventory $18,000; Accounts receivable $7,056; Computer table $1,200.
Karl’s contribution: Cash $19,194; Inventory $2,000; Accrued expenses $800
Required:
- Prepare the initial balance sheet for Pat and Karl as at 1 March 2018,
- What would happen to the balance sheet if, over the following four weeks, Pat and Karl made a cash profit of $14,000? (Note: Assume all other figures remain constant and Pat and Karl agree to split any profit or loss in the proportion of their contributions to the partnership).
1.
| Assets |
Liabilities Total Liabilities |
| Partner’s Equity Total Partner’s Equity |
|
| Total Assets |
Total Liabilities and Equity |
- The changes would be: