1
I Skip and U Jump sell toys. Their individual investments in the business on 1 January 2004
were: Skip £80,000, Jump £40,000.
For the year to 31 December 2004, the net profit was £30,000 and the partners’ drawings were:
Skip £8,000, Jump £9,000.
For 2004 (their first year), the partners agreed to share profits and losses equally, but they
decided that from 1 January 2005:
(i
) The partners should be entitled to annual salaries of: Skip £10,000; Jump £14,000.
(ii
) Interest should be allowed on capital at 7% per annum.
(iii
) The profit remaining should be shared equally (as should losses).
Drawings
Net trading profit Skip Jump
before dealing
with partners’ items
£ £ £
2005 38,000 13,000 17,000
2006 29,000 12,000 20,000
Required:
Prepare the profit and loss appropriation accounts and the partners’ current accounts for the three
years.