Answered: a. $135,000; $135,000. d. $185,000;…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Jamison and Blue form a partnership with capital contributions of $600,000 and $800,000, respectively. Their partnership agreement calls for Jamison to receive $120,000 per year in salary. Also, each partner is to receive an interest
allowance equal to 10% of the partner’s beginning capital contributions, with any remaining income or loss divided equally. If net income for its initial year is $270,000, then Jamison’s and Blue’s respective shares are:

a. $135,000; $135,000.
d. $185,000; $85,000.
$85,000; $185,000.
e.
b. $154,286; $115,714.
c. $120,000; $150,000.

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.

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