Calculate each partner’s share of last year’s income, assuming that the proposed
ID: 2774862 • Letter: C
Question
Calculate each partner’s share of last year’s income, assuming that the proposed allocation of partnership income from Appendix A had been in place.
Table 1
Income Statement ($ in thousands)
ACCOUNT
PHARMACY
SUNDRIES
LUNCH COUNTER
TOTAL
Sales
$ 600,000
$ 620,000
$ 252,000
$1,472,000
Cost of Goods Sold
375,000
400,000
75,000
850,000
Gross Profit
225,000
220,000
177,000
622,000
Direct Operating Expenses
110,000
100,000
60,000
270,000
Salaries
100,000*
40,000
30,000
170,000
Allocated Common Expenses
30,000
30,000
30,000
90,000
Net Income
$ (15,000)
$ 50,000
$ 56,0000
$ 92,000
*Represents owner’s withdrawals.
Allocation of Partnership Income
a.
An allowance of $100,000 will be allocated to Junior Davis, $40,000 to Mary Jones, and $30,000 to Nancy Wilson.
b.
Each partner will get 20% of the income or loss for his or her department without consideration of the allocation from part “a.” The formula for each department is ((gross profit – the sum of direct operating expenses + allocated common expenses) x 20%).
c.
All remaining profits or losses will be allocated to the partners evenly.
ACCOUNT
PHARMACY
SUNDRIES
LUNCH COUNTER
TOTAL
Sales
$ 600,000
$ 620,000
$ 252,000
$1,472,000
Cost of Goods Sold
375,000
400,000
75,000
850,000
Gross Profit
225,000
220,000
177,000
622,000
Direct Operating Expenses
110,000
100,000
60,000
270,000
Salaries
100,000*
40,000
30,000
170,000
Allocated Common Expenses
30,000
30,000
30,000
90,000
Net Income
$ (15,000)
$ 50,000
$ 56,0000
$ 92,000
Explanation / Answer
ACCOUNT PHARMACY SUNDRIES LUNCH COUNTER TOTAL Sales $ 600,000 $ 620,000 $ 252,000 $1,472,000 Cost of Goods Sold 3,75,000 4,00,000 75,000 8,50,000 Gross Profit 2,25,000 2,20,000 1,77,000 6,22,000 Direct Operating Expenses 1,10,000 1,00,000 60,000 2,70,000 Allocated Common Expenses 30,000 30,000 30,000 90,000 Net Income 85,000 90,000 87,000 2,62,000 Share Of profit 51000 54000 52200 157200 allowance 1,00,000 40,000 30,000 1,70,000 -66,000 -4,000 4,800 -65,200 Junior Davis Mary Jones Nancy Wilson Total Each partner will get 20% of the income or loss for his or her department without consideration of the allocation from part “a.” The formula for each department is 157200 157200 157200 471600 allowance 100000 40000 30000 170000 PHARMACY share of profit/loss -22000.00 -22000.00 -22000.00 -21733.33333 SUNDRIES share of profit/loss -1333.33 -1333.33 -1333.33 -4000.00 LUNCH COUNTER share of profit/loss 1600.00 1600.00 1600.00 4800.00 Total 235466.67 175466.67 165466.67 620666.67
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.