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Richard is a retired solicitor. His wife Tracy is a retired school teacher. Both wish to remain active and they invest in a gift shop that is to be managed by their daughter Alice, who is aged 35. They form a
Richard and Tracy contributed $40,000 each to fund the purchase of the shop. The partnership agreement provides:
•Both Richard and Tracy are to receive interest at the rate of 10% p.a. on their capital contribution of $40,000.
•Alice will receive a salary of $25,000 for the management of the shop, as well as superannuation contributions of$6,000.
•A car will be leased by the business and provided to Alice.
•All
The accounts for this income year show the following:
| Income ($) | |
| Sales (excluding GST) | 240,000 |
| Expenses($) | |
| Cost of good sold | 130,000 |
| Interest on capital paid to Richard and Tracy | 8,000 |
| salary to Alice | 25,000 |
| superannuation to Alice | 6,000 |
| lease payment on car(excluding GST) | 7,000 |
| Other deductible operating expenses(excluding GST) | 14,000 |
The leased car was used 80% of the time for business and 20% of the time for private purposes.
Required:
With reference to the facts above:
A.Calculate the net income of the partnership.
B.Show the allocation of net income to each of the three partners.
C.You must refer to relevant legislation and/or case law in your answer.
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- Richard is a retired solicitor. His wife Tracy is a retired school teacher. Both wish to remain active and they invest in a gift shop that is to be managed by their daughter Alice, who is aged 35. They form a partnership of three called “Alice's Gift Shop”. Richard and Tracy contributed $40,000 each to fund the purchase of the shop. The partnership agreement provides: • Both Richard and Tracy are to receive interest at the rate of 10% p.a. on their capital contribution of $40,000. • Alice will receive a salary of $25,000 for the management of the shop, as well as superannuation contributions of $6,000. • A car will be leased by the business and provided to Alice. • All profits and losses are to be shared equally between the three partners. The accounts for this income year show the following: Income ($) Sales (excluding GST) 240,000 Expenses ($) Cost of goods sold 130,000 Interest on capital paid to Richard and Tracy 8,000 Salary to Alice 25,000 Superannuation to Alice 6,000 Lease…Richard is a retired solicitor. His wife Tracy is a retired school teacher. Both wish to remain active and they invest in a gift shop that is to be managed by their daughter Alice, who is aged 35. They form a partnership of three called “Alice's Gift Shop”. Richard and Tracy contributed $40,000 each to fund the purchase of the shop. The partnership agreement provides: Both Richard and Tracy are to receive interest at the rate of 10% p.a. on their capital contribution of $40,000. Alice will receive a salary of $25,000 for the management of the shop, as well as superannuation contributions of $6,000. A car will be leased by the business and provided to Alice. All profits and losses are to be shared equally between the three partners. The accounts for this income year show the following: Income ($) Sales (excluding GST) 240,000 Expenses ($) Cost of goods sold 130,000 Interest on capital paid to Richard and Tracy 8,000 Salary to Alice 25,000…Richard is a retired solicitor. His wife Tracy is a retired school teacher. Both wish to remain active and they invest in a gift shop that is to be managed by their daughter Alice, who is aged 35. They form a partnership of three called “Alice's Gift Shop”. Richard and Tracy contributed $40,000 each to fund the purchase of the shop. The partnership agreement provides: Both Richard and Tracy are to receive interest at the rate of 10% p.a. on their capital contribution of $40,000. Alice will receive a salary of $25,000 for the management of the shop, as well as superannuation contributions of $6,000. A car will be leased by the business and provided to Alice. All profits and losses are to be shared equally between the three partners The accounts for this income year show the following: Income ($) Sales (excluding GST) 240,000 Expenses ($) Cost of goods sold 130,000 Interest on Capital paid to Richard and Tracy 8,000 Salary to Alice 25,000 Supperannuation to…
- Richard is a retired solicitor. His wife Tracy is a retired school teacher. Both wish to remain active and theyinvest in a gift shop that is to be managed by their daughter Alice, who is aged 35. They form a partnershipof three called “Alice's Gift Shop”.Richard and Tracy contributed $40,000 each to fund the purchase of the shop. The partnership agreementprovides:• Both Richard and Tracy are to receive interest at the rate of 10% p.a. on their capitalcontribution of $40,000.• Alice will receive a salary of $25,000 for the management of the shop, as well assuperannuation contributions of $6,000.• A car will be leased by the business and provided to Alice.• All profits and losses are to be shared equally between the three partners.The accounts for this income year show the following:Income ($)Sales (excluding GST) 240,000Expenses ($)Cost of goods sold 130,000Interest on capital paid to Richard and Tracy 8,000Salary to Alice 25,000Superannuation to Alice 6,000Lease payments on car…Alon is a retired Doctor. His wife Nancy is a retired Social Worker. Both wish to remain active and they invest in a gift shop that is to be managed by their daughter Heather, who is aged 35. They formed a partnership of three called "Heather 's Gift Shop". Alon and Nancy contributed $40,000 each to fund the purchase of the shop. The partnership agreement provides: Both Alon and Nancy are to receive interest at the rate of 10% pa on their capital contribution of $40,000. Heather will receive a salary of $25,000 for the management of the shop, as well as superannuation contributions of $6,000. A car will be leased by the business and provided to Heather. All profits and losses are to be shared equally between the three partners. The accounts for this income year show the following: Income ($) Sales (excluding GST) 240,000 Expenses ($) Cost of goods sold 130,000 Interest on capital paid to Alon and Nancy 8,000 Salary to Heather 25,000…Ivana, Eric, and Jerry form a partnership to develop land into commercial offices and rent them for a profit. Ivana contributes land with a fair market value of $1,200,000 and a $600,000 basis. Eric and Jerry each contribute $600,000 of cash. (a) Assume that Ivana is a 50% partner and that Eric and Jerry each are 25% partners. If the partnership earns $400,000 from operations in its first year and distributes the cash proportionately, does Ivana recognize any gain? (b) Pursuant to the written partnership agreement, the partnership pays Ivana $100,000 a year for six years, regardless of its income, as a guaranteed payment for capital. Alternatively, pursuant to the partnership agreement, the partnership allocates and distributes the first $100,000 of income exclusively to Ivana for six years. Assume that the highest applicable federal rate for all years equals 8%. Does Ivana recognize any gain?
- and Sumara started a retailing shop on a partnership. Each of them contributed $500,000 fund to the business. The partnership agreement provides: Both Ali and Sumara are to receive interest at the rate of 5% pa on their capital contribution. Sumara will receive a salary of $95,000 for the management of the shop, as well as superannuation contributions of $15,600. The remainder in profit and loss will be shared Ali 70% and Sumara 30% The accounts for this income year show the following: Income ($) Sales 915,000 Expenses ($) Cost of goods sold 326,000 Interest on capital paid to Ali and Sumara in total 9,000 Salary to Ali 95,000 Concessional Superannuation to Ali 12,000 Rent expense 38,000 Other deductible operating expenses 61,000 Required: Calculate the net income of the partnership. Show the allocation of net income to each of the partners.Jean, Conny, and Sasha decided to put up a meat and potato business so they formed a partnership on January 1, 2021, each partner investing P250,000 and agree to distribute profits equally. On February 10, 2021, Jeanwanted to give Mikasa a present, thus, he was advanced P100,000 by the firm. On September 1, 2021, Conny made a loan to the firm of P200,000. Interest is to be charged on advances to partners and credited on loansby partners at the rate of 12%. Business became unsatisfactory because Sasha kept on eating all the meat and potatoes that the partnership offers, thus, the partners decided to dissolve the business. Sasha is allowed special compensation of P25,000 for managing the sale of assets and settlement with creditors. On December 31, all assets have been sold, outside creditors have been paid, and cash of P350,000 is distributed topartners. All partners are personally solvent and final settlement is made among partners on February 10, 2022. How much Conny would receive…three partners, John, Jim, and Alice form a partnership. John invests $27,500; Jim invests $10,700, and Alice invests $8,400. In addition, Jim performs specific management functions for which he is paid $2,000 from the partnership proceeds. if the partnership earns $176,000, how much will jim receive?
- Mike and Rachel form M&R Partnership. Mike invests $40,000 cash and Rachel invests $60,000 cash. The partners agree to share income as follows: Mike gets a salary allowance of $5,000 per year and Rachel gets a salary allowance of $9,000 per year; both get an annual interest allowance of 10% on their initial investment; and any remaining balance is shared equally. Net income for the year is $30,000. Also, Mike withdrew $1,000 cash from the partnership and Rachel withdrew $2,000. Prepare a statement of partners’ equity for the year ended December 31.On February 1, 2020, Tessa Williams and Audrey Xie formed a partnership in Ontario. Williams contributed $89,000 cash and Xie contributed land valued at $129,000 and a small building valued at $189,000. Also, the partnership assumed responsibility for Xie’s $139,000 long-term note payable associated with the land and building. The partners agreed to share profit or loss as follows: Williams is to receive an annual salary allowance of $99,000, both are to receive an annual interest allowance of 12% of their original capital investments, and any remaining profit or loss is to be shared equally. On November 20, 2020, Williams withdrew cash of $69,000 and Xie withdrew $54,000. After the adjusting entries and the closing entries to the revenue and expense accounts, the Income Summary account had a credit balance of $169,000.Required:1. Present general journal entries to record the initial capital investments of the partners, their cash withdrawals, and the December 31 closing of the Income…Mike and Rachel form M&R Partnership. Mike Invests $40,000 cash and Rachel invests $60,000 cash. The partners agree to share income as follows: Mike gets a salary allowance of $5,000 per year and Rachel gets a salary allowance of $9,000 per year, both get an annual interest allowance of 10% on their initial investment, and any remaining balance is shared equally. Net income for the year is $30,000. Also, Mike withdrew $1,000 cash from the partnership and Rachel withdrew $2,000. Prepare a statement of partners' equity for the year ended December 31. Note: Do not round intermediate calculations. Enter all allowances as positive values. Enter losses and withdrawals as negative values. M&R PARTNERSHIP Statement of Partners' Equity For Year Ended December 31 Mike Initial partnership investments Net income Total net income Total Rachel Total