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.

Answered: The partnership agreement of Gibbs and…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

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.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions