B 1 2 B 5 5 Erin and Kathy form a partnership with Erin contributing $700 and Kathy contributing $300. The partners have agreed that Erin will first receive a return of her $700 investment, then Kathy will receive her $300 contribution and any additional distributions will be made 70 percent to Erin and 30 percent to Kathy. Year 1 book income is $100. At the end of Year 1 partnership assets have a book value $1,100 (the original contributions increased by Year 1 income). 1 How much Year 1 income will be allocated to Erin and Kathy? Clearly explain your answer. Question 5 Part 2 The facts are the same as in Part 1 except Year 1 produces a book loss of $100. At the end of 3 Year 1, partnership assets have a book value of $900 (the original contributions reduced by Year 1 loss).
B 1 2 B 5 5 Erin and Kathy form a partnership with Erin contributing $700 and Kathy contributing $300. The partners have agreed that Erin will first receive a return of her $700 investment, then Kathy will receive her $300 contribution and any additional distributions will be made 70 percent to Erin and 30 percent to Kathy. Year 1 book income is $100. At the end of Year 1 partnership assets have a book value $1,100 (the original contributions increased by Year 1 income). 1 How much Year 1 income will be allocated to Erin and Kathy? Clearly explain your answer. Question 5 Part 2 The facts are the same as in Part 1 except Year 1 produces a book loss of $100. At the end of 3 Year 1, partnership assets have a book value of $900 (the original contributions reduced by Year 1 loss).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 5 Part 1
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Erin and Kathy form a partnership with Erin contributing $700 and Kathy contributing $300.
The partners have agreed that Erin will first receive a return of her $700 investment, then
Kathy will receive her $300 contribution and any additional distributions will be made 70
percent to Erin and 30 percent to Kathy. Year 1 book income is $100. At the end of Year 1
partnership assets have a book value $1,100 (the original contributions increased by Year 1
income).
1 How much Year 1 income will be allocated to Erin and Kathy? Clearly explain your
20
21
2 The facts are the same as in Part 1 except Year 1 produces a book loss of $100. At the end of
Year 1, partnership assets have a book value of $900 (the original contributions reduced by
Year 1 loss).
answer.
Question 5 Part 2
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