Asked by marta kebede on Jun 24, 2024
Verified
Carraway and Boos have a partnership agreement which includes the following provisions regarding sharing net income or net loss:
1. A salary allowance of $48000 to Carraway and $36000 to Boos.
2. An interest allowance of 10% on capital balances at the beginning of the year.
3. The remainder to be divided 60% to Carraway and 40% to Boos.
The capital balance on January 1 2017 for Carraway and Boos was $90000 and $120000 respectively. During 2017 the Carraway and Boos Partnership had sales of $495000 cost of goods sold of $290000 and operating expenses of $85000.
Instructions
Prepare an income statement for the Carraway and Boos Partnership for the year ended December 31 2017. As a part of the income statement include a Division of Net Income to each of the partners.
Salary Allowance
A fixed amount of money paid at regular intervals to an employee, often as a benefit over their standard salary.
Interest Allowance
A deduction or allocation of interest expense, often related to tax calculations or financial assistance programs.
Net Income
Net income refers to the total earnings of a company once all costs, taxes, and expenses have been deducted from the overall revenue.
- Compute division of net income among partners according to various agreements.
Verified Answer
Learning Objectives
- Compute division of net income among partners according to various agreements.
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