4. Humbolt Hardware Company is a partnership with net income of $84,000 and needs to split thisbetween partners Ethel Hardachre and Dave Vader. As Ethel Hardachre works full-time in thebusiness, they have an annual salary of $38,000 and contributed 1,092 of hours of work. The otherpartner, Dave Vader, put in 454.5 hours of work and has an annual salary of $29,250. The partnerssplit $12,100 of the net income as additional salary based upon the ratio of hours of work. Thepartners invested $20,500 (Ethel Hardachre) and $14,625 (Dave Vader). Each partner will receive 5%on their invested capital. Any residual net income or loss will be split based upon the ratio ofinvested capital. Prepare a schedule (showing calculations) of the split of net income or loss amongstthe partners.

Lets understand the basics. Partnership is an agreement between two or more person who works…

Answered: 4. Humbolt Hardware Company is a…

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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The partnership of Michelle, Amal, and Maureen has done well. The three partners have shared profits and losses in a 1:3 ratio, with capital balances of $60,000 each. Maureen wants to retire and withdraw. Prepare a schedule showing how the cost should be divided if Amal and Michelle decide to pay Maureen $70,000 for retirement of her capital account and the new agreement will share profits and losses 50:50.
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