Answered: Determine the amount of net income that…

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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Question

Steve and Heather decided to form a partnership on April 1. Steve invested $60,000 and Heather invested $40,000. Net income for the fiscal year ended March 31 was $110,000. Each partner is to receive 10% on their original investment. Steve and Heather are to receive a salary allowance of $35,000 and $45,000, respectively. The remainder is to be divided as follows: 70% to Steve and 30% to Heather.

Determine the amount of net income that Steve and Heather would have received.

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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