FRA June 2005 apprpriation

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:30AM in AAT student discussion
With the appropriation account should the profit have been shared Old/New all the way down or when you got to £19000 do you share it 4 months then 8 months? Please see the 2 versions below.<BR><BR>Total Profit
£101,250<BR>Old Profit
£67500<BR>New Profit
£33750<BR><BR>Salaries<BR>Dan
£20000<BR>Kim
£20000
£10000<BR>Ted
£20000
£10000<BR>Total
£60000
£20000
£80000<BR><BR>Interest on Capital<BR>Dan
£750<BR>Kim
£750<BR>Ted
£750<BR>Total
£2250
£2250<BR><BR>Profit Apportionment<BR>Dan
£5065<BR>Kim
£3800
£3167<BR>Ted
£3800
£3167<BR>Total
£12666
£6334
£19000<BR><BR><BR>Total
£101250<BR><BR><BR><BR><BR>OR SHOULD IT HAVE BEEN??<BR><BR><BR><BR>Total Profit
£101,250<BR>Old Profit
£67500<BR>New Profit
£33750<BR><BR>Salaries<BR>Dan
£20000<BR>Kim
£20000
£10000<BR>Ted
£20000
£10000<BR>Total
£60000
£20000
£80000<BR><BR>Interest on Capital<BR>Dan
£750<BR>Kim
£750<BR>Ted
£750<BR>Total
£2250
£2250<BR><BR>Profit Apportionment<BR>Dan
£210<BR>Kim
£1575
£6334<BR>Ted
£1575
£6875<BR>Total
£5250
£13750
£19000<BR><BR><BR>Total
£101250<BR><BR><BR>

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA June 2005 apprpriation

    Hiya<BR><BR>Can't remember figures but the profit was shared by all for the first period and equally by the two partners left at the last period.<BR><BR>Hope this helps
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA June 2005 apprpriation

    I checked this answer with my tutor and she thought this is correct, provided that the info I gave her was also correct (she hadn't seen the question at that point, so no guarantees). Dan should only get 500 interest because it's 3% per annum. Shares of profit for different periods should be calculated separately because Dan is only entitled to a slice of profit earned in the first 8 months.<BR><BR>PERIOD 1 (8 months)<BR><BR>Profit available (8/12x101250)......................................................67500<BR>Less salaries: Dan....................................................20000<BR>.......................Kim.....................................................20000<BR>......................Ted......................................................20000.........(60000)<BR>.................................................................................._____<BR>Less interest on capital: Dan (8/12x3%x25000)...........500<BR>.......................................Kim (8/12x3%x25000)...........500<BR>.......................................Ted (8/12x3%x25000)...........500..........(1500)<BR>.................................................................................._____........_______<BR>Profit available to share...................................................................6000<BR>Profit share: Dan (40%x6000).....................................2400<BR>.....................Kim (30%x6000)....................................1800<BR>.....................Ted (30%x6000)....................................1800............6000<BR>.................................................................................._____........_______<BR><BR>PERIOD 2 (4months)<BR>
    <BR>Profit...............................................................................................33750<BR>Less salaries: Kim (4/12x30000)................................10000<BR>.......................Ted (4/12x30000)................................10000.........(20000)<BR>..................................................................................._____<BR>less interest on capital: Kim (4/12x3%x25000).............250<BR>......................................Ted (4/12x3%x25000..............250..............(500)<BR>..................................................................................._____.........______<BR>Profit available to share..................................................................13250<BR>Profit share: Kim (50%x13250)...................................6625<BR>....................Ted (50%x13250)...................................6625............13250<BR>..................................................................................._____.........______<BR><BR>Therefore, profit shares for the year:<BR>Dan = 2400<BR>Kim 1800 + 6625 = 8425<BR>Ted 1800 + 6625 = 8425<BR>Total = 19250
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA June 2005 apprpriation

    to be honest. I have NEVER seen it done like that before
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA June 2005 apprpriation

    I think the first example in FTC book was done this way. Also have a look at FTC specimen exam answers. It's available on the AAT Intermediate msn group.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    FRA June 2005 apprpriation

    Osbourne Books have done it different again!!!<BR><BR>I dont think anyone can be 100% sure what the AAT are going to choose, but I think that most will past this section. Both ways seem to be correct.<BR><BR>I think it was a bad question, knowing Dans money is still in the accounts at the year end and the transfer to loan didnt take place to the year end - so I think he should have had the whole interest for the year, afterall its his money stuck there!<BR><BR>I sure most will pass due to the understanding of what they have done - even if its been done a different way.<BR><BR>Amanda

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