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.
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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