Appropriation account : interest on capital

Options
lifeisstrange
lifeisstrange Registered Posts: 27 Epic contributor 🐘
Hi everybody,
I have a question relating to account preparation II : the appropriation account and the interest on capital.
I have bought Kaplan revision kit 2011-2012 and I have done the mock exam and I am stuck on the task 2.2.
It is said interest on capital accounts: 3 % per annum on the balance at the beginning of the year. I have a trial balance as at 31 December 20x8 for 2 partners and the capital account for each is:
- Capital account-Mitul(credit):26200
- Capital account-Shah(credit):37800
I have to calculate the interest on capital from (1) 1/01/08-30/04/08 and from (2) 1/05/08-31/12/08.
I arrived to this answers:
Mitul: (1) 262 (2) 524 Total:786
Shah: (1) 378 (2) 756 Total:1134
But Kaplan’s answers are not the same:
Mitul (1)260 (2)520 Total:780
Shah (1) 370 (2)740 Total:1110
Could you explain me how they get those answers?
Thank You.

Comments

  • omega man
    omega man Registered Posts: 283
    Options
    There seems to be more to this question than you have given,can you please post the complete question.
  • lifeisstrange
    lifeisstrange Registered Posts: 27 Epic contributor 🐘
    Options
    Hi Omega Man,
    Here is the complete question:

    Mitul and Shah Partnership
    Trial Balance as at 31 December 2008

    Sales (Credit) 794518
    Sales Returns (Debit) 5436
    Purchases (Debit) 370215
    Purchases returns (Credit) 1447
    Opening stock (Debit) 41210
    Payroll expenses (Debit) 161326
    General expenses (Debit) 72900
    Motor expenses (Debit) 14633
    Irrecoverable debts (Debit) 4825
    Allowance for doubtful debts (Credit) 3425
    Motor vehicle at cost (Debit) 37400
    Accumulated depreciation: MV (Credit) 19160
    Fixtures and fittings at cost (Debit) 46100
    Accumulated depreciation: FF (Credit) 20855
    Capital account - Mitul: (Credit) 26200
    Capital account - Shah: (Credit) 37800
    Current account- Mitul: (Debit) 15000
    Current account- Shah: (Debit) 11000
    Drawings- Mitul: (Debit) 18000
    Drawings- Shah: (Debit) 22000
    SLCA (Debit) 70368
    PLCA (Credit) 25682
    Bank (Debit) 26338
    VAT (Credit) 4529
    Closing stock 54426 54426
    Loss on disposal (Debit) 3870
    Depreciation expense (Debit) 12995

    All the yearend adjustments have been made, except for the transfer of profit to current accounts of the partners.
    The partnership agreement allows for the following:
    - Partners salaries
    Mitul: £25000 Shah: £10000
    - Interest on capital accounts: 3% per annum on the balance at the beginning of the year
    - Profit share, effective until 30 April 2008
    Mitul 2/3 Shah 1/3
    - Profit share, effective from 1 may 2008
    Mitul ½ Shah1/2
    - During the year Mitul made £18000 of drawings and Shah £22000
    - Profit for the year ended 31 December 2008 was £162981 which accrued evenly during the year.
    Prepare the appropriation account for the year ended 31 December 2008.

    I only have a problem with interest on capital. Thanks for your help.
  • MarkT
    MarkT Registered Posts: 302
    Options
    Hi Lifeisstrange,

    I'm sorry, but as someone who passed this module and exceeded each part, even I am having difficulties in disagreeing with your answers - and at the end of the day, the AAT exam, I am pretty sure would not down-mark you for coming to the answers you did.

    My reasons for saying this are on the basis that the question relates to the interest on capital which as far as I can see, has no bearing on the profit sharing change in the partnership.

    Someone please tell me that I am missing something here - otherwise, Lifeisstrange, please ask Kaplan how they came to that answer, I'd like to hear it!
  • omega man
    omega man Registered Posts: 283
    Options
    There is something wrong with this question,investigate and get back to us please.
  • omega man
    omega man Registered Posts: 283
    Options
    As far as i can work out your answers are indeed correct as i have done the income statement,statement of financial position and the appropriation account and i balance,so their answers to capital are wrong.
  • lifeisstrange
    lifeisstrange Registered Posts: 27 Epic contributor 🐘
    Options
    Hi Omega man,
    I have sent a message to Kaplan but I haven't received an answer yet.
    Thank you all for your help.
  • katsutlieff
    katsutlieff Registered Posts: 459 Dedicated contributor 🦉
    Options
    I am revising partnerships for my business tax exam on Thursday and have just completed similar activities. I am coming up with the same answers as you.

    We use Osborne books and I know that they print amendments to their books on their website in the activites section maybe Kaplin have something similar

    Good luck
  • j1994
    j1994 Registered Posts: 106
    Options
    How to calculate the share of profit for distrubution? Profit share is 40% and profit for partenrship is £162000
Privacy Policy