Explanation Partnership : A partnership is an unincorporated form of business which is formed by an agreement, owned and managed mutually by two or more individuals, who invest their assets in the business and share the liabilities and profits among themselves. Net income: The bottom line of income statement which is the result of excess of earnings from operations (revenues) over the costs incurred for earning revenues (expenses) is referred to as net income. a. Income of $526,000. Division of Net Income Particulars Partner A Partner B Partner C Net Income Net income to be divided $526,000 Salary allowances to partners $10,000 $50,000 $28,000 ($88,000) Income after salary allowances $438,000 Interest allowances on capital: Partner A (1) $21,600 Partner B (2) $16,800 Partner C (3) $9,600 Total allocated as interest ($48,000) Remaining income after salary and interest allowances $390,000 Allocated in a fixed ratio: Partner A (1/2) $195,000 Partner B (1/3) $130,000 Partner C (1/6) $65,000 ($390,000) Total share to each partner $226,600 $196,800 $102,600 $0 Table (1) Therefore, from the above calculation it is observed that, total share to Partner A is $226,600 , Partner B is $196,800 and Partner C is $102,600 . Note: Residual profit or loss is divided for Partner A at 1/2, Partner B at 1/3 and for Partner C at 1/6. b. Income of $95,000. Division of Net Income Particulars Partner A Partner B Partner C Net Income Net income to be divided $95,000 Salary allowances to partners $10,000 $50,000 $28,000 ($88,000) Income after salary allowances $7,000 Interest allowances on capital: Partner A (1) $21,600 Partner B (2) $16,800 Partner C (3) $9,600 Total allocated as interest ($48,000) Remaining loss after salary and interest allowances ($41,000) Allocated in a fixed ratio: Partner A (1/2) ($20,500) Partner B (1/3) ($13,667) Partner C (1/6) ($6,833) $41,000 Total share to each partner $11,100 $53,133 $30,767 $0 Table (2) Therefore, from the above calculation it is observed that, total share to Partner A is $11,100 , Partner B is $53,133 and Partner C is $30,767 . Note: Residual profit or loss is divided for Partner A at 1/2, Partner B at 1/3 and for Partner C at 1/6. c. Loss of $32,000...

Prepare separate schedules to show the way, income will be divided among the Partners in each of the cases.

Financial Accounting

18th Edition

ISBN: 9781260706307

Author: Jan Williams

Publisher: Mcgraw-hill Higher Education (us)

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Chapter C, Problem 11P

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Prepare separate schedules to show the way, income will be divided among the Partners in each of the cases.

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Chapter C, Problem 10P

Chapter C, Problem 12P

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