Rock, a mason and Lumber, a carpenter decided to form a partnership business. Rock invested $60 000
and Lumber $40 000 on January 1, 2005.
The partnership agreement provided for the following:
1. Rock is to receive a monthly salary of 350.
2. Interest on capital 6% per annum.
3. Interest on drawing 8.5% per annum.
The Business made a profit of $32 500 for the period of operation ending December 31, 2005
Rock made drawings of $5000 on July 1, 2005: Lumber made a drawing of $4 800 on November 1, 2005.
a) Give TWO reasons why Rock and Lumber decided to form a partnership. (4 pts)
b) What does a debit balance on a capital account means? (4pts)
c) State TWO distinguishing features between a partnership and a sole trader. (4 pts)
d) Prepare the partnership profit and loss appropriation account for the Year ended December 31, 2005.
(16 pts)
e) Prepare Rock's Capital Account (10 pts)
Answers: 3
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Rock, a mason and Lumber, a carpenter decided to form a partnership business. Rock invested $60 000...
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