Jhumpa, Stewart, and Kelly are all one-third partners in the capital and profits of Firewalker General Partnership. In addition to their normal share of the partnership's annual income, Jhumpa and Stewart each receive an annual guaranteed payment of $10,000 to compensate them for additional services they provide. Firewalker's income statement for the current year reflects the following revenues and expenses: Sales revenue $340,000 Interest income 3,300 Long-term capital gains 1,200 Cost of goods sold (120,000) Employee wages (75,000) Depreciation expense (28,000) Guaranteed payments (20,000) Miscellaneous expenses (4,500) Overall net income $97,000 (Leave no answer blank. Enter zero if applicable.)c. How much self-employment tax will each partner pay assuming none has any other source of income or loss? (Round your intermediate calculations and final answers to the nearest whole dollar amount.) JhumpaStewartKellySelf-employment tax

Self-employment tax: Self-employment income is earned through business carried on either by sole…

Answered: Jhumpa, Stewart, and Kelly are all…

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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Jhumpa, Stewart, and Kelly are all one-third partners in the capital and profits of Firewalker General Partnership. In addition to their normal share of the partnership's annual income, Jhumpa and Stewart each receive an annual guaranteed payment of $10,000 to compensate them for additional services they provide. Firewalker's income statement for the current year reflects the following revenues and expenses:


Sales revenue		$340,000
Interest income		3,300
Long-term capital gains		1,200
Cost of goods sold		(120,000)
Employee wages		(75,000)
Depreciation expense		(28,000)
Guaranteed payments		(20,000)
Miscellaneous expenses		(4,500)
Overall net income		$97,000

(Leave no answer blank. Enter zero if applicable.)

c. How much self-employment tax will each partner pay assuming none has any other source of income or loss? (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

	Jhumpa	Stewart	Kelly
Self-employment tax

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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