The partnership agreement of Angela and Dawn has the following provisions: 1. The partners are to earn 10 percent on the average capital. 2. Angela and Dawn are to earn salaries of $26,000 and $18,000, respectively. 3. Any remaining income or loss is to be divided between Angela and Dawn using a 70:30 ratio. Angela's average capital is $59,000 and Dawn's is $43,000. Required: Prepare an income distribution schedule assuming the income of the partnership is (a) $90,000 and (b) $28,000. If no partnership agreement exists, what does the UPA 1997 prescribe as the profit or loss distribution percentages? Note: Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign. (a) Distribution of $90,000 income: Profit percentage Average capital Net income Interest on average capital Salary Residual income (deficit) Allocate Total (b) Distribution of $28,000 income: Angela 70 % $ 26,000 $ 18,000 $ 5,900 32,200 Dawn 64,100 $ 102,200 30 % $ 4,300 13,800 36,100 $54,200 Total 100 % $ 46,000 (10,200) (46,000) $(10,200) (100,200) $ (110,400)
The partnership agreement of Angela and Dawn has the following provisions: 1. The partners are to earn 10 percent on the average capital. 2. Angela and Dawn are to earn salaries of $26,000 and $18,000, respectively. 3. Any remaining income or loss is to be divided between Angela and Dawn using a 70:30 ratio. Angela's average capital is $59,000 and Dawn's is $43,000. Required: Prepare an income distribution schedule assuming the income of the partnership is (a) $90,000 and (b) $28,000. If no partnership agreement exists, what does the UPA 1997 prescribe as the profit or loss distribution percentages? Note: Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign. (a) Distribution of $90,000 income: Profit percentage Average capital Net income Interest on average capital Salary Residual income (deficit) Allocate Total (b) Distribution of $28,000 income: Angela 70 % $ 26,000 $ 18,000 $ 5,900 32,200 Dawn 64,100 $ 102,200 30 % $ 4,300 13,800 36,100 $54,200 Total 100 % $ 46,000 (10,200) (46,000) $(10,200) (100,200) $ (110,400)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
Transcribed Image Text:The partnership agreement of Angela and Dawn has the following provisions:
1. The partners are to earn 10 percent on the average capital.
2. Angela and Dawn are to earn salaries of $26,000 and $18,000, respectively.
3. Any remaining income or loss is to be divided between Angela and Dawn using a 70:30 ratio.
Angela's average capital is $59,000 and Dawn's is $43,000.
Required:
Prepare an income distribution schedule assuming the income of the partnership is (a) $90,000 and (b) $28,000. If no partnership
agreement exists, what does the UPA 1997 prescribe as the profit or loss distribution percentages?
Note: Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign.
(a) Distribution of $90,000 income:
Profit percentage
Average capital
Net income
Interest on average capital
Salary
Residual income (deficit)
Allocate
Total
(b) Distribution of $28,000 income:
Angela
70 %
$ 26,000
Dawn
64,100
$ 102,200
30 %
$18,000
$ 5,900 $ 4,300
32,200
13,800
36,100
$ 54,200
Total
100 %
$ 46,000
(10,200)
(46,000)
$(10,200)
(100,200)
$
(110,400)
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