Tom, James and Alex operate a coffee shop as a partnership. The partnership agreement stipulates that all
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Tom, James and Alex operate a coffee shop as a partnership. The partnership agreement stipulates that all partners are to share the residual. Profits equally once the salary of Tom, the caf manager, has been paid. In addition, the agreement states that interest on capital accounts is to be paid at a rate of 20% per annum.
The accounting net income of the partnership is 400,000 after deducting the following amounts:
- Salary of $30,000 paid to Tom.
- Interest of $4,000 paid to Alex for an amount he loaned to the partnership, that was used to purchase more trading stock.
Interest paid on partner's capital account $14,000
Partners' capital account balance:
- Tom $20,000
- James $40,000
- Alex $80,000
- Calculate the S90 ITAA36 net partnership income for the year ended 30 June 2019.
- Explain how you arrived at the net partnership income and any adjustments that were necessary.
- Prepare a distribution statement to each of the partners for the year ended 30 June 2019.
Related Book For
Fundamentals of Advanced Accounting
ISBN: 978-1259722639
7th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
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