Carraway and Boos have a partnership agreement which includes the following provisions regarding sharing net income or net loss: A salary allowance of $48,000 to Carraway and $36,000 to Boos. An interest allowance of 10% on capital balances at the beginning of the year. The remainder is to be divided 60% to Carraway and 40% to Boos. The capital balance on January 1, 2014, for Carraway and Boos, was $90,000 and $120,000, respectively. During 2014, the Carraway and Boos Partnership had sales of $495,000, cost of goods
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.
Carraway and Boos have a partnership agreement which includes the following provisions regarding sharing net income or net loss:
- A salary allowance of $48,000 to Carraway and $36,000 to Boos.
- An interest allowance of 10% on capital balances at the beginning of the year.
- The remainder is to be divided 60% to Carraway and 40% to Boos.
The capital balance on January 1, 2014, for Carraway and Boos, was $90,000 and $120,000, respectively. During 2014, the Carraway and Boos Partnership had sales of $495,000, cost of goods sold of $290,000, and operating expenses of $85,000.
Instructions
Prepare an income statement for the Carraway and Boos Partnership for the year ended December 31, 2014. As a part of the income statement, include a Division of Net Income to each of the partners. (13 marks)
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