Appropriation account : interest on capital

lifeisstrange

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.

omega man

There seems to be more to this question than you have given,can you please post the complete question.

lifeisstrange

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

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

There is something wrong with this question,investigate and get back to us please.

omega man

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

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

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

How to calculate the share of profit for distrubution? Profit share is 40% and profit for partenrship is £162000