Question

Butler and John operate a music store as a partnership. The partnership agreement states that profits...

Butler and John operate a music store as a partnership. The partnership agreement states that profits and losses are to be shared equally after adjusting for interest on capital, superannuation, drawings and salaries paid to the partners

Income ($)

Sales

$896,900

Interest from Advance to John

2,000

Expenses ($)

Cost of goods sold

416,000

Salary-Butler

63,000

Salary-employees

110,000

Superannuation to Butler

14,000

Superannuation to employees

13,000

Interest on capital to Butler

7,000

Interest on Capital to John

9,500

Interest on loan from CBA

19,000

Drawings to Butler

32,000

Drawings to John

17,000

Other deductible operating expenses

105,000

Additional information:

Trading stock balances were estimated as follows:

30 June 2019                 86,000

30 June 2020                 94,000

Required:

Calculate the net income of the partnership. Show the allocation of net income to each of the partners.

Homework Answers

Answer #1

Calculation of Net income of the Partnership

Sales = $ 896,900

Interest from ADvance to john = $ 2,000

Closing Stock = $ 94,000

Less:

Opening stock = $ 86,000

Cost of goods sold= $ 416,000

Gross profit = $ 490,900

Less:Operating Expenses

Salary - Butler =$ 63,000

Salary-Employees =$ 110,000

Superannuation to buttler = $ 14,000

Superannuation to employees = $ 13,000

Interest on capital to Buttler = $ 7,000

Interest on capital to John = $ 9,500

Interest on loan from CBA = $ 19,000

Other Deductible operating Expenses = $ 105,000

Net profit = $ 150,400

Net Income of Partners

Profit sahre ratio equally. Therfore profit for each partner will be $ 75,200

Butler

Profit share = $ 75,200

Less:Drawings : $ 32,000

Net Income of Butler = $ 43,200

John

Profit share = $ 75,200

Less: Drawings = $ 17,000

Net Income to Butler = $ 58,200

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