Capital mp. addition to their normal share of the partnership's annual income, Jhumpa and Stewart receive an annual guaranteed payment of $10,000 each to compensate them for additional services they provide. Firewalker's income statement for the current year reflects the following revenues and expenses: $ 340,000 3,300 1,200 (120,000) (75,000) (28,000) (20,000) (4,500) Sales revenue Interest income Long-term capital gains Cost of goods sold Employee wages Depreciation expense Guaranteed payments Miscellaneous expenses Overall net income $ 97,000 (Leave no answer blank. Enter zero if applicable.) b. How will Firewalker allocate ordinary business income and separately stated items to its partners? (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.
Calculation of ordinary business income
| CALCULATION | PARTICULAR | AMOUNT($) |
| A | Sales | 340,000 |
| B | Cost of goods sold | 120,000 |
| C= A-B | Gross profit | 220,000 |
| Operating expense | ||
| D | Wages | 75,000 |
| E | Depreciation Expense | 28,000 |
| F | Guranteed payment | 20,000 |
| G | Miscellaneous expense | 4,500 |
| H= C- D-E-F-G | Net income | 92,500 |
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