Essa Al Raisi and Kadir Al Mandhri have capital balances on January 1 of $40,000 and $70,000, respectively. The partnership income-sharing agreement provides for annual salaries of $24,000 for Essa Al Raisi and $15,000 for Kadir Al Mandhri, interest at 10% on beginning capital balances, and remaining income or loss to be shared 60% by Essa Al Raisi and 40% by Kadir Al Mandhri. Instructions Prepare a schedule showing the distribution of net income, assuming net income is $60,000 and $42,000 Journalize the allocation of net income in each of the situations above.
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.
- Essa Al Raisi and Kadir Al Mandhri have capital balances on January 1 of $40,000 and $70,000, respectively. The
partnership income-sharing agreement provides for
- annual salaries of $24,000 for Essa Al Raisi and $15,000 for Kadir Al Mandhri,
- interest at 10% on beginning capital balances, and
- remaining income or loss to be shared 60% by Essa Al Raisi and 40% by Kadir Al Mandhri.
Instructions
- Prepare a schedule showing the distribution of net income, assuming net income is
- $60,000 and
- $42,000
- Journalize the allocation of net income in each of the situations above.
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