Answered: David and Isac are in partnership,…

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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David and Isac are in partnership, sharing profits 3:2.

On 1 July 2020 Casey joins the partnership. Under the new partnership agreement profits will be shared by David, Isac, and Casey 5:3:2 respectively with the following annual salaries.

Isac £30,000 pa

Casey £38,000 pa

Profit accrues evenly over the year. The partnership profit for the year at 31 Dec 2020 was £450,000. What was the allocated profit as 31 Dec 2020 for David, Isac, and Casey?

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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