The partnership agreement provides of Xx, YY and ZZ provides for the year end allocation of net income in the following order: • First, XX is to receive 10% of net income up to 200,000 and 20% over 200,000 • Second, YY and ZZ each are to receive 5% of the remaining income over 300,000 • The balance of income is to be allocated equally among the three partners. The partnerships net income was 500,000 before any allocation to partners. What amount should be allocated to XX?
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.
The
income in the following order:
• First, XX is to receive 10% of net income up to 200,000 and 20% over 200,000
• Second, YY and ZZ each are to receive 5% of the remaining income over 300,000
• The balance of income is to be allocated equally among the three partners.
The partnerships net income was 500,000 before any allocation to partners. What amount should be
allocated to XX?
a. 202,000
b. 216,000
c. 206,000
d. 220,000
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