[The following information applies to the questions displayed below.] Kramer and
ID: 2485075 • Letter: #
Question
[The following information applies to the questions displayed below.] Kramer and Knox began a partnership by investing $62,000 and $57,000, respectively. During its first year, the partnership earned $165,000. Prepare calculations showing how the $165,000 income should be allocated to the partners under each of the following three separate plans for sharing income and loss: 5. Required information (1) The partners failed to agree on a method to share income. 6. Required information (2) The partners agreed to share income and loss in proportion to their initial investments. (Do not round intermediate calculations.) 7. Required information (3) The partners agreed to share income by granting a $56,500 per year salary allowance to Kramer, a $46,500 per year salary allowance to Knox, 12% interest on their initial capital investments, and the remaining balance shared equally. (Enter all allowances as positive values. Enter losses as negative values.)
Explanation / Answer
Kramer And Knox 5 when there is no profit sharing agreement, the net income will be shares in 50:50 ratio. Kramer Knox Share of Earning of $165,000 $ 82,500.00 $ 82,500.00 6 When income shared in the ratio of investment Kramer Knox Total Investment 62,000 57,000 119,000 Ratio of Investment= 52.10% 47.90% Share of $165,000 income = 85,966 79,034 165,000 7 Income sharing as per rule defined; Kramer Knox Total Salary allocated 56,500 46,500 103,000 12% interest on investment 7,440 6,840 14,280 Remaining Balance shared equally = 23,860 23,860 47,720 Total 87,800 77,200 165,000
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