Hawthorn and Privet have carried on business in

partnership for #8264

Hawthorn and Privet have carried on business in partnership for a number of years, sharing
profits in the ratio of 4 : 3 after charging interest on capital at 4 per cent per annum. Holly was
admitted into the partnership on 1 October 20X2, and the terms of the partnership from then
were agreed as follows: 1. Partners' annual salaries to be: Hawthorn £1,800, Privet £1,200,
Holly £1,100.2. Interest on capital to be charged at 4 per cent per annum.3. Profits to be shared:
Hawthorn four-ninths, Privet three-ninths, Holly two ninths. On 1 October 20X2 Holly paid
£7,000 into the partnership bank and of this amount £2,100 was in respect of the share of
goodwill acquired by her. Since the partnership has never created, and does not intend to
create, a goodwill account, the full amount of £7,000 was credited for the time being to Holly's
capital account at 1 October 20X2.The trial balance of the partnership at 30 June 20X3 was as
follows:After taking into account the following information and the adjustment required for
goodwill, prepare a statement of profit and loss for the year ended 30 June 20X3 and a
statement of financial position as on that date. On 30 June 20X3:1. Inventory was £15,000.2.
Rates (£110) and wages and salaries (£300) were outstanding.3. Telephone rental paid in
advance was £9.4. Provision for bad debts is to be adjusted to 2.5 per cent of trade
receivables.5. Depreciation is to be provided on furniture, fixtures and fittings at 10 per
cent.Apportionments required are to be made on a time basis.View Solution:
Hawthorn and Privet have carried on business in partnership for

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