Lopez and Gonzales started a partnership with initial cash investments of $700,000 and $650,000, respectively. The articles of partnership stipulate salary allowances of $250,000 to Lopez and $100,000 to Gonzales. In addition, each partner will receive a 12% interest allowance on beginning capital balances, with any remainder divided in the ratio of 5:3, respectively. Required: If the partnership had net income of $666,000, how much profit would be allocated to each partner? Lopez: SO $O Gonzales:
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.
![Lopez and Gonzales started a partnership with initial cash investments of $700,000 and $650,000, respectively. The articles of partnership stipulate salary
allowances of $250,000 to Lopez and $100,000 to Gonzales.
In addition, each partner will receive a 12% interest allowance on beginning capital balances, with any remainder divided in the ratio of 5:3, respectively.
Required:
If the partnership had net income of $666,000, how much profit would be allocated to each partner?
Lopez:
SO
Gonzales:
$0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7b411f18-a564-47b9-9b85-1b36735fee09%2F0bfd70e3-cbf8-41b1-bcaf-13f495ac406e%2F5gw8el8o_processed.jpeg&w=3840&q=75)
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