Mrs. Shine was registered in Jamaica as a sole trader in 2015. To grow her practice Mrs. Shine decided to enter into a partnership agreement with Mr. Rain, thus the status of the business was changed in 2021. In 2022, the partnership income statement for Shine & Rain was as follows: Income Statement for the year ended 31 December 2022 Revenue 11,600,000 Expenses Salaries & Wages 7,600,000 Employer NIS Contribution 1,400,000 Rent and Rate 2,400,000 Interest 500,000 Maintenance 120,000 Depreciation 550,000 Loss on Disposal of Vehicle 80,000 Telephone 235,000 Electricity 255,000 General Expenses 700,000 Donations 85,000 Provision for Bad Debts 80,000 Fines and Penalties 115,000 Drawings 105,000 14,225,000 Net Loss 2,625,000 Notes to the Income Statement $55,000 of the drawings relate to Mrs. Shine and $50,000 to Mr. Rain Gross Salary for Mrs. Shine was $250,000 per month and $200,000 for Mr. Rain. Both partners worked in the business during the year. The annual allowance was $450,000. The partners agreed to dispose of an old pick-up truck with a net book value of $350,000 for $400,000. The pick-up had a tax written down value of $300,000. Donations of $60,000 were made to a local political party to fund its campaign. The remainder was donated to an approved local children’s home. The partners could not determine if all their clients would be able to settle their bills on time so a general provision of $60,000 was made to cushion the effect of the any debt going bad. The balance related to a particular client that had gone bankrupt, which the firm was unable to collect after several attempts. Fines and Penalties include traffic offences of $5,000 and penalties of $10,000 for non-filing of VAT returns for the period January – March 2022. Interest accrued was $50,000 for the year. The partnership agreement stated that the partners are to share profit and loss in the ratio 60:40 ( Shine 60% and Rain 40%) Shine is a director for a local company and receives net emoluments of $2,250,000 per annum; PAYE of $750,000 was deducted. During the year Mr. Rain rented his private dwelling for $150,000 per month for 8 months. He also received gross income from teaching law at a university of $6,000,000 per year. The partners each paid estimated obligations of $20,000 per quarter on March 15, June 15, September 15, and December 15. Rain received interest income from his financial institution of $150,000 for the year. Mrs. Shine received an interest income of $75,000. PAYE deducted from Mrs. Shine salary from the practice was $352,476 and $109,476 for Mr. Rain. The partners both invested $5,000,000 in the business. The interest rate agreed on capital invested was 8%. NIS for Mr. Rain was $240,00 and Mrs. Shine was $210,000. Required Calculate the adjusted profit / loss

Mrs. Shine was registered in Jamaica as a sole trader in 2015. To grow her practice Mrs. Shine decided to enter into a partnership agreement with Mr. Rain, thus the status of the business was changed in 2021. In 2022, the partnership income statement for Shine & Rain was as follows: Income Statement for the year ended 31 December 2022 Revenue 11,600,000 Expenses Salaries & Wages 7,600,000 Employer NIS Contribution 1,400,000 Rent and Rate 2,400,000 Interest 500,000 Maintenance 120,000 Depreciation 550,000 Loss on Disposal of Vehicle 80,000 Telephone 235,000 Electricity 255,000 General Expenses 700,000 Donations 85,000 Provision for Bad Debts 80,000 Fines and Penalties 115,000 Drawings 105,000 14,225,000 Net Loss 2,625,000 Notes to the Income Statement $55,000 of the drawings relate to Mrs. Shine and $50,000 to Mr. Rain Gross Salary for Mrs. Shine was $250,000 per month and $200,000 for Mr. Rain. Both partners worked in the business during the year. The annual allowance was $450,000. The partners agreed to dispose of an old pick-up truck with a net book value of $350,000 for $400,000. The pick-up had a tax written down value of $300,000. Donations of $60,000 were made to a local political party to fund its campaign. The remainder was donated to an approved local children’s home. The partners could not determine if all their clients would be able to settle their bills on time so a general provision of $60,000 was made to cushion the effect of the any debt going bad. The balance related to a particular client that had gone bankrupt, which the firm was unable to collect after several attempts. Fines and Penalties include traffic offences of $5,000 and penalties of $10,000 for non-filing of VAT returns for the period January – March 2022. Interest accrued was $50,000 for the year. The partnership agreement stated that the partners are to share profit and loss in the ratio 60:40 ( Shine 60% and Rain 40%) Shine is a director for a local company and receives net emoluments of $2,250,000 per annum; PAYE of $750,000 was deducted. During the year Mr. Rain rented his private dwelling for $150,000 per month for 8 months. He also received gross income from teaching law at a university of $6,000,000 per year. The partners each paid estimated obligations of $20,000 per quarter on March 15, June 15, September 15, and December 15. Rain received interest income from his financial institution of $150,000 for the year. Mrs. Shine received an interest income of $75,000. PAYE deducted from Mrs. Shine salary from the practice was $352,476 and $109,476 for Mr. Rain. The partners both invested $5,000,000 in the business. The interest rate agreed on capital invested was 8%. NIS for Mr. Rain was $240,00 and Mrs. Shine was $210,000. Required Calculate the adjusted profit / loss

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 3PB

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Related questions

Question

In 2022, the partnership income statement for Shine & Rain was as follows:

Income Statement for the year ended 31 December 2022

Revenue		11,600,000
Expenses
Salaries & Wages	7,600,000
Employer NIS Contribution	1,400,000
Rent and Rate	2,400,000
Interest	500,000
Maintenance	120,000
Depreciation	550,000
Loss on Disposal of Vehicle	80,000
Telephone	235,000
Electricity	255,000
General Expenses	700,000
Donations	85,000
Provision for Bad Debts	80,000
Fines and Penalties	115,000
Drawings	105,000	14,225,000
Net Loss		2,625,000

Notes to the Income Statement

$55,000 of the drawings relate to Mrs. Shine and $50,000 to Mr. Rain
Gross Salary for Mrs. Shine was $250,000 per month and $200,000 for Mr. Rain. Both partners worked in the business during the year.
The annual allowance was $450,000.

The partners agreed to dispose of an old pick-up truck with a net book value of $350,000 for $400,000. The pick-up had a tax written down value of $300,000.
Donations of $60,000 were made to a local political party to fund its campaign. The remainder was donated to an approved local children’s home.
The partners could not determine if all their clients would be able to settle their bills on time so a general provision of $60,000 was made to cushion the effect of the any debt going bad. The balance related to a particular client that had gone bankrupt, which the firm was unable to collect after several attempts.
Fines and Penalties include traffic offences of $5,000 and penalties of $10,000 for non-filing of VAT returns for the period January – March 2022.
Interest accrued was $50,000 for the year.
The partnership agreement stated that the partners are to share profit and loss in the ratio 60:40 ( Shine 60% and Rain 40%)
Shine is a director for a local company and receives net emoluments of $2,250,000 per annum; PAYE of $750,000 was deducted.
During the year Mr. Rain rented his private dwelling for $150,000 per month for 8 months. He also received gross income from teaching law at a university of $6,000,000 per year.
The partners each paid estimated obligations of $20,000 per quarter on March 15, June 15, September 15, and December 15.
Rain received interest income from his financial institution of $150,000 for the year. Mrs. Shine received an interest income of $75,000.
PAYE deducted from Mrs. Shine salary from the practice was $352,476 and $109,476 for Mr. Rain.
The partners both invested $5,000,000 in the business. The interest rate agreed on capital invested was 8%.
NIS for Mr. Rain was $240,00 and Mrs. Shine was $210,000.

Required

Calculate the adjusted profit / loss

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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