Answered: 1. Calculate the net income of each…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On 1 October 2020, Duane and Kevin, two Cryptocurrency advisory professionals, commenced a partnership. As Duane had contributed most of the working capital, the partnership agreement provided that Duane would receive 60% of the net partnership income. For the year ended 30 June 2021 the partnership returned net income of $120,000. This was after a payment of $10,000 in interest to Duane on $120,000 capital which he had contributed to the partnership. $40,000 of the net partnership income was derived from overseas.

1. Calculate the net income of each partner for the year ended 30 June 2021.

2. If Kevin had only been a resident of Australia since 1 January 2020, how would this affect the calculation of the net income of each partner?

Please answer both subparts.

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Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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