Answered: QUESTION 2 Irfan and Laila agreed to…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter19: Accounting For Partnerships

Section: Chapter Questions

Problem 3SEB

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QUESTION 2

Irfan and Laila agreed to form a partnership. Irfan contributed RM200,000 in cash and Laila contributed assets with a fair market value of RM400,000. The partnership, in its initial year, reported a net income of RM120,000. Calculate the distribution of the first’s year income to the partners under each of the following conditions:

Irfan and Laila agreed to share income and losses in a 3:2 ratio.
Irfan and Laila agreed to share income and losses in the ratio of their original investments.

Irfan and Laila agreed to share income and losses by allowing 10% interest on original investments and sharing any remainder equally

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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