Required information Paul and Wayne equally own PW Partnership. Paul's basis was $30,000 and Wayne's basis was $22,000 at the beginning of the year. PW Partnership had the following income and expense items: Sales$330,000Cost of goods sold 220,000Guaranteed payment to Paul 40,000Rent expense 24,000Depreciation 33,000Interest expense 4,000Tax-exempt income 3,000Health insurance premiums for Paul 3,600Health insurance premiums for Wayne 3,600 PW Partnership's non-financial information is as follows:Name: PW PartnershipAddress: 5 Furniture Street, Anywhere, NC 28777EIN: 56-1234567Date Partnership Began: 01/01/10Business Code: 442110Principal Business Activity: RetailPrincipal Product or Service: FurnitureFollows the Cash Method of Accounting b. Calculate Paul’s basis in his partnership interest.

Partnership: This is the form of business entity which is formed by an agreement, owned and managed…

Answered: Calculate Paul’s basis in his…

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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Required information

Paul and Wayne equally own PW Partnership. Paul's basis was $30,000 and Wayne's basis was $22,000 at the beginning of the year. PW Partnership had the following income and expense items:


Sales	$	330,000
Cost of goods sold		220,000
Guaranteed payment to Paul		40,000
Rent expense		24,000
Depreciation		33,000
Interest expense		4,000
Tax-exempt income		3,000
Health insurance premiums for Paul		3,600
Health insurance premiums for Wayne		3,600

PW Partnership's non-financial information is as follows:

Name: PW Partnership
Address: 5 Furniture Street, Anywhere, NC 28777
EIN: 56-1234567
Date Partnership Began: 01/01/10
Business Code: 442110
Principal Business Activity: Retail
Principal Product or Service: Furniture
Follows the Cash Method of Accounting

b. Calculate Paul’s basis in his partnership interest.

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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