Hope, Enjoy & Faith Inc. reports net income of $140,000. The partnership agreeme

Question

Hope, Enjoy & Faith Inc. reports net income of $140,000.

The partnership agreement provides for annual salaries:

Hope               $ 20,000

Enjoy               $ 15,000

Faith                $ 10,000

The partnership agreement provides for interest allowances:

Hope               $10,000

Enjoy               $11,000

Any remaining income or loss is to be shared:

Enjoy 30%

Hope 10%

Faith 60%

The beginning capital for the partners are:

Enjoy               $132,000

Faith                $190,000

Hope               $100,000

During the 2016:

Hope contribution additional investment in the partnership for $10,000

Enjoy withdrawals $4,000.

Instructions

Prepare the schedule to distribution the net income.

Prepare the statement of capital for the Hope, Enjoy and Faith Inc.

Explanation / Answer

A. Schedule to distribution the net income  

Profit after Salary And Interest : 140000-(20000+15000+10000)-(10000+11000) = 74000 $

So these 74000 $ will be shared in ratio given that is

Enjoy : 74000 * 30% = $ 22200

Hope: 74000 * 10 % = $ 7400

Faith : 74000 * 60% = $ 44400

B. Statement of capital for the Hope, Enjoy and Faith Inc.

1. Statement For Hope

2. Statement for Enjoy

3. Statement for Faith

Particular Amount $ (DR) Amount $ (CR) Opening Balance 100,000 Salary 20,000 Interest 10,000 Share In Profit 7,400 Bank A/c (Additional Contribution) 10,000 Closing Balance 147,400 Total 147,400 147,400

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