Required: With reference to the facts above: A.Calculate the net income of the partnership. B.Show the allocation of net income to each of the three partners. C.You must refer to relevant legislation and/or case law in your answer
Richard is a retired solicitor. His wife Tracy is a retired school teacher. Both wish to remain active and they invest in a gift shop that is to be managed by their daughter Alice, who is aged 35. They form a partnership of three called “Alice's Gift Shop”.
Richard and Tracy contributed $40,000 each to fund the purchase of the shop. The partnership agreement provides:
- Both Richard and Tracy are to receive interest at the rate of 10% p.a. on their capital contribution of $40,000.
- Alice will receive a salary of $25,000 for the management of the shop, as well as superannuation contributions of $6,000.
- A car will be leased by the business and provided to Alice.
- All
profits and losses are to be shared equally between the three partnersThe accounts for this income year show the following:
Income ($) Sales (excluding GST) 240,000 Expenses ($) Cost of goods sold 130,000 Interest on Capital paid to Richard and Tracy 8,000 Salary to Alice 25,000 Supperannuation to Alice 6,000 Lease payments on car (excluding GST) 7,000 Other deductible operating expenses (excluding GST) 14,000 The leased car was used 80% of the time for business and 20% of the time for private purposes.
Required:
With reference to the facts above:
A.Calculate the net income of the partnership.
B.Show the allocation of net income to each of the three partners.C.You must refer to relevant legislation and/or case law in your answer.
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