Question

On January 1, 2008, Tony and Jon formed T&J Personal Financial Planning with capital investments of $480,000 and $340,000, respectively. The partners wanted to draft a profit and loss agreement that would reward each individual for the resources invested in the partnership. Accordingly, the partnership agreement provides that profits are to be allocated as follows:
1. Annual salaries of $42,000 and $66,000 are granted to Tony and Jon, respectively.
2. In addition to the salary, Jon is entitled to a bonus of 10% of net income after salaries and bonus but before interest on capital investments is subtracted.
3. Each partner is to receive an interest credit of 8% on the original capital investment.
4. Remaining profits are to be allocated 40% to Tony and 60% to Jon.
On December 31, 2008, the partnership reported net income before salaries, interest, and bonus of $188,000.

Required:
Calculate the 2008 allocation of partnership profit.



$1.99
Sales1
Views46
Comments0
  • CreatedMarch 16, 2015
  • Files Included
Post your question
5000