Jhumpa, Stewart, and Kelly are all one-third partners in the capital and profits of Firewalker General Partnership. In addition to their normal share of the partnership's annual income, Jhumpa and Stewart receive an annual guaranteed payment of $10,000 each to compensate them for additional services they provide. Firewalker's income statement for the current year reflects the following revenues and expenses: $ 340,000 3,300 1,200 Sales revenue Interest income Long-term capital gains Cost of goods sold Employee wages Depreciation expense Guaranteed payments Miscellaneous expenses (120,000) ( 75,000) (28,000) (20,000) ( 4,500) Overall net income $ 97,000 (Leave no answer blank. Enter zero if applicable.) How will Firewalker allocate ordinary business income and separately stated items to its partners? (Round your intermediate Iculations and final answers to the nearest whole dollar amount.) Description Jhumpa Stewart Kelly
Jhumpa, Stewart, and Kelly are all one-third partners in the capital and profits of Firewalker General Partnership. In addition to their normal share of the partnership's annual income, Jhumpa and Stewart receive an annual guaranteed payment of $10,000 each to compensate them for additional services they provide. Firewalker's income statement for the current year reflects the following revenues and expenses: $ 340,000 3,300 1,200 Sales revenue Interest income Long-term capital gains Cost of goods sold Employee wages Depreciation expense Guaranteed payments Miscellaneous expenses (120,000) ( 75,000) (28,000) (20,000) ( 4,500) Overall net income $ 97,000 (Leave no answer blank. Enter zero if applicable.) How will Firewalker allocate ordinary business income and separately stated items to its partners? (Round your intermediate Iculations and final answers to the nearest whole dollar amount.) Description Jhumpa Stewart Kelly
Chapter4: Gross Income: Concepts And Inclusions
Section: Chapter Questions
Problem 43P
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Transcribed Image Text:Jhumpa, Stewart, and Kelly are all one-third partners in the capital and profits of Firewalker General Partnership. In
addition to their normal share of the partnership's annual income, Jhumpa and Stewart receive an annual guaranteed
payment of $10,000 each to compensate them for additional services they provide. Firewalker's income statement for the
current year reflects the following revenues and expenses:
$ 340,000
3,300
1,200
(120,000)
(75,000)
( 28,000)
( 20,000)
(4,500)
$ 97,000
Sales revenue
Interest income
Long-term capital gains
Cost of goods sold
Employee wages
Depreciation expense
Guaranteed payments
Miscellaneous expenses
Overall net income
(Leave no answer blank. Enter zero if applicable.)
b. How will Firewalker allocate ordinary business income and separately stated items to its partners? (Round your intermediate
calculations and final answers to the nearest whole dollar amount.)
Description
Jhumpa
Stewart
Kelly
Expert Solution
Step 1
Calculation of ordinary business income
| CALCULATION | PARTICULAR | AMOUNT |
| A | Sales revenue | 340,000 |
| B | Cost of goods sold | (120,000) |
| C=A-B | Gross margin | 220,000 |
| Other operating expense | ||
| D | Wages | (75,000) |
| E | Depreciation | (28,000) |
| F | Guranteed payment | (20,000) |
| G | Misc. Expense | (4,500) |
| H= C-D-E-F-G | Net income | 92,500 |
Income to be allocated to each Partner
Jhumpa = 92,500 /3 =$ 30,833
Stewart = 92,500 /3 =$ 30,833
Kelly = 92,500 /3 =$ 30,833
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