The partnership agreement of Gibbs and Reed has the following provisions: Salary allowances are $20,000 for Gibbs and $30,000 for Reed. No interest is given on the partners’ capital balances. Any income/loss greater than the salary allowances is divided using a 2:3 ratio. Revenues of $130,000 and expenses of $62,000 resulted in net income for the first year of operations of $68,000. Calculate the net income distributed to each partner.
The partnership agreement of Gibbs and Reed has the following provisions: Salary allowances are $20,000 for Gibbs and $30,000 for Reed. No interest is given on the partners’ capital balances. Any income/loss greater than the salary allowances is divided using a 2:3 ratio. Revenues of $130,000 and expenses of $62,000 resulted in net income for the first year of operations of $68,000. Calculate the net income distributed to each partner.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- The partnership agreement of Gibbs and Reed has the following provisions:
- Salary allowances are $20,000 for Gibbs and $30,000 for Reed.
- No interest is given on the partners’ capital balances.
- Any income/loss greater than the salary allowances is divided using a 2:3 ratio.
Revenues of $130,000 and expenses of $62,000 resulted in net income for the first year of operations of $68,000. Calculate the net income distributed to each partner.
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