Cook, Jing, and Schwartz formed the CJS Partnership by making investments of $144,000, $216,000, and $120,000, respectively. They predict annual partnership net income of $240,000 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $40,000 to Cook, $30,000 to Jing, and $80,000 to Schwartz; interest allowances of 12% on their initial capital investments; and the remaining balance shared equally. Required 1.how to distribute net income of $240,000 for the calendar year under each of the alternative plans being considered.
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.
Cook, Jing, and Schwartz formed the CJS
$120,000, respectively. They predict annual partnership net income of $240,000 and are considering the
following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital
investments; or (c) salary allowances of $40,000 to Cook, $30,000 to Jing, and $80,000 to Schwartz; interest
allowances of 12% on their initial capital investments; and the remaining balance shared equally.
Required
1.how to distribute net
income of $240,000 for the calendar year under each of the alternative plans being considered.
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