Question

jensen and stafford began a partnership to start a hardwood flooring installation business by investing 160000 and 200000 respectively.they agreed to share profits by providing yearly salary allowances of 150000 to jensen and 75000 to stafford 20% interest allowances on their investments and sharing the balance 3:2 .determine each partner's share if the first year profit was420000

Answer 1

STATEMENT SHOWING PROFIT DISTRIBUTION IN THE YEAR 1
		PARTNERS
		Jensen	Stafford
Particulars	Total Amount in $	Amount in $	Amount in $
First Year Profit =	$                             4,20,000
Distributed As Salary	$                            -2,25,000	$                  1,50,000	$                    75,000
Balance	$                             1,95,000
Interest Allowance
To Jensen $ 160,000 X 20% =	$                               -32,000	$                      32,000
To Stafford $ 200,000 X 20% =	$                               -40,000		$                    40,000
Balance Distributable Profit	$                             1,23,000
Balance $ 123,000 is Distributed in 3: 2 Ratio	$                            -1,23,000	$                      73,800	$                    49,200
		($123,000 X3/5)	($123,000 X2/5)
Total Distributed profit	$                                          -	$                  2,55,800	$                 1,64,200