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.
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
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$6,000.
•A car will be leased by the business and provided to Alice.
•All
The accounts for this income year show the following:
| Income ($) | |
| Sales (excluding GST) | 240,000 |
| Expenses($) | |
| Cost of good sold | 130,000 |
| Interest on capital paid to Richard and Tracy | 8,000 |
| salary to Alice | 25,000 |
| superannuation to Alice | 6,000 |
| lease payment 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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