The PQ partnership has the following plan for the distribution of partnership net income (loss): P Q Salaries $ 80,000 $ 100,000 Bonus on net income 6% 12% Interest on average capital balances 7%
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 PQ
| P | Q | |
|---|---|---|
| Salaries | $ 80,000 | $ 100,000 |
| Bonus on net income | 6% | 12% |
| Interest on average capital balances | 7% | 7% |
| Remainder (if positive) | 60% | 40% |
| Remainder (if negative) | 50% | 50% |
Required:
Calculate the distribution of partnership net income (loss) for each independent situation below (for each situation, assume the average capital balance of P is $140,000 and of Q is $240,000).
- Partnership net income is $360,000.
- Partnership net income is $240,000.
- Partnership net loss is $40,000.
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