Blanche, Rose and Dorothy own and run a small hotel in partnership. They share profits and losses
Question:
Blanche, Rose and Dorothy own and run a small hotel in partnership. They share profits and losses equally. The receive interest on their capital accounts at 20% on the balance of each partner at the end of the financial year. The summarized trading account for the hotel at 31 December 2015 was as follows:
$'000 $'000
Income 14 000
Less Expenses
Wages, salaries & related expense 4 200
Food, beverages, consumable stores 2 100
Security & Office Supplies 1 100
Motor vehicle expenses 700
General expenses 150
Utilities (light ,water, phone) 275
Hotel insurance 325
bank charhes and interest 300
Depreciation 275
Total expense 9 425
Net Profit 4 575
Other Information
A. The adjusted tax loss carried forward from 2o14 was $816 000.
B. The partner’s salary allowances and interest are as given in the appropriation account.
C. Included in general expenses is the amount of $42 000 for subscriptions and donation. A breakdown of the subscriptions and donation is as follows:
i. $20 000 donations to a church and school event not on the approved charity listing of Jamaica.
ii. $22 000 magazine and service club subscriptions
D. The partnership paid motor vehicle expenses for the cars owed by the partners as follows: Blanche - $60 000; Rose - $ 72 000; Dorothy - $24 000. These amounts are included in the hotel’s motor vehicle expenses. It is estimated that they use the car 75% of the time for business purposes.
E. The capital allowance for the year of assessment 2015 are $174 000.
Require
Show each partner’s share of profit for taxation purposes.
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry