On January 1, FRED and GEMMO formed a partnership by contributing cash of 405,000 and 270,000, respectively. On February 1. Fred contributed an additional 135,000. On May 1, Gemmo contributed machinery with a fair market value of 90,000 and a net book value of 75,000 when contributed. On November 1, Gemmo contributed an additional 45,000 cash to the partnership. The partnership reported a net income of 257,400 for the year and the profit or loss agreement are as follows: Interest at 6% is allowed on average capital balances; Salaries if 2,700 per month to each partner; Bonus to Fred of 10% of net income after interest, salaries and bonus; and Balance to be divided in the ratio of 6:4 to Fred and Gemmo, respectively. Required: Prepare a schedule for the division of net profit for 2016 with supporting computations when appropriate.
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.
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