P12-36B Beau, Cole, and Drake formed a partnership. Beau invested $15,000 Cole $

Question

P12-36B Beau, Cole, and Drake formed a partnership. Beau invested $15,000 Cole $20,000, and Drake $25,000. Beau will manage the store; Cole will work in the store half-time and Drake will not work in the business Requirements 1. Compute the partners' shares of profits and losses under each of the following plans a. Net loss is $50,000, and the partnership agreement allocates 40% of profits to Beau, 25% to Cole, and 35% to Drake. The agree- ment does not specify the sharing of losses.(pp. 601-602) ontinued.. b. Net income for the year ended January 31, 2009, is $177,000 The first $75,000 is allocated based on partner capital balances, and the next $36,000 is based on service, with Beau receiving $28,000 and Cole receiving $8,000. Any remainder is shared equally. (pp. 602-603) 2. Revenues for the year ended January 31, 2009, were S507,000, and expenses were $330,000. Under plan (b) above, prepare the partner saip income statement for the year (p. 614)

Explanation / Answer

1.

(a) Losses $50000

Share of B - 50000*40% = 20000

Share of C = 50000*25%= 12500

Share of D = 50000*35% = 17500

(b) First 75000 in ratio of capital i.e 15:20:25

B = (75000/60)*15=18750

C = (75000/60)*20 = 25000

D = (75000/60)* 25=31250

Second 36000

B = 28000

C = 8000

Remainder Equal

B = 66000/3 = 22000

C = 22000

D = 22000

2. Profit = Revenue - Expenses = 507000-330000 = 177000

Beau Cole Drake 75000 18750 25000 31250 36000 28000 8000 - 66000 22000 22000 22000 Total 68750 55000 53250

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