Answered: a) Paul, Betty and Rose are in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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a) Paul, Betty and Rose are in partnership sharing profits in the ratio of 5:3:2. Rose is guaranteed a minimum share of profits of $10,000.
Profits for the years ended 2016 & 2017 as follows:
31 Dec 2016 200,000
31 Dec 2017 42,000
Required:
1. Calculate the share of profits to each partner for 2016 and 2017.

2. Describe the tax treatment of a partnership.

Kindly assist me to solve this question

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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