FRA exam

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can anyone help me out with the appropriation question in section 2<BR>I divided the profit by12 and multiplied it by 8 to reach the profit for the first part of the year but i also did the same with wages and interest before sharing the profit<BR>Then for the second part i divided the profit bt 12 and divided it by 4 to give the profit to be shared for the second part of the year and also did the same for wages and interest before sharing the profit with the 2 remaining partners<BR>Think i have got it totally wrong

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Well your profit after deducting 750+750+500 Interest and 20,000+,30,000+,30,000 for Salaries should be split by /12 x 8, then split between the profit sharing ratio up to November, then the remaining split 50/50.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Did you not need to pro rata the interest as well as the salary for the person who left?<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    My logic was that it didn't seem fair on the retiring partner to have less profit because the full years wages were being <BR>taken out of the profit for the full year
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Well he shouldn't receive a years salary for only being part of it for 3/4 of the year.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    What i meant was the other 2 partners received a salary of £30k per year, so if the retiring partner left 3/4 of the way through the year is it fair for the £30k for each partner to be taken out of the profit which will leave less to share. The retiring partner should not have to consider wages for remaing partners after he has left. surely when working out his profit only 3/4 of the wages should be considered
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    He wouldn't. He would only get £20,000 of his annual salary of £30,000, leaving £10,000 extra profit to be split by the remaining partners.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Ye, but the remaining two partners salaries were upto march 4 months after he retired, so if £30k was used for each of the remaining partners the retired partner was losing out on £20k of profit (divided by 3 = £6.667.00 ish)<BR>Starting to confuse myself now<BR>I'm probably wrong just trying to get help to help me understand
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Hi Jade,<BR>If you are still around - I think that what you are saying makes a lot of sense. But I don't think the AAT go into that much detail. The old exam paper for Dec 2003 has a similar case and their answer takes off the salaries for the whole year before distributing the available profit.<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Jade, i am glad i am not the only one who thought the same as you.<BR>i had 3 different workings for this appropriation a/c<BR>but i still think like u do about the fairness of the allocation of profit
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    another one I got wrong, when the question said interest was calculated at beginning of the year (I cant remember the date) I presumed that dan would get interest on the whole of his capital not just the 20,000, oh well looks like i'll be sitting it again in December <img src="i/expressions/face-icon-small-sad.gif" border="0">
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Hi Dave42,<BR>In the Dec 03 past paper it only said that the profit share had changed through the year and not that a partner had left, In which case it would be fair to share the wages and interest before profit sharing as all partners were still in the company at the end of the financial year
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Hi Jade,<BR>I just looked at it again and you're right.<BR>In that case I don't think we have seen a question like this before - I don't remember one.<BR>What you're saying makes a lot of sense, and I think you're probably right. I just hope they don't mark the rest of us down too much!<BR><BR>Dave<BR><BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Dave,<BR>Am feeling pretty confused at the mo, not sure that I am right no one else seems to have the same thought process as me<BR>so I'm starting to think that I've got it completely wrong, if so it could me enough for me to fail, although I feel that I did really well in the rest of the exam. The appropriation question was a long one and I think it was probably worth a lot of marks.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Hi Jade<BR><BR>I did it the same way. I split the net profit 67,500 - 8 months and 33,750 for 4 months. I also split everything else 8/12 and 4/12. I had 2 columns showing the profit available to share from each period. <BR><BR>I find it easier to calculate this way.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA exam

    Thats exactly what i did Jade! Dont think its wrong.

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