Jensen and Stafford began a partnership to start a hardwood flooring installation business, by investing $179,000...

Jensen and Stafford began a partnership to start a hardwood flooring installation business, by investing $179,000 and $219,000, respectively. They agreed to share profits/(losses) by providing yearly salary allowances of $169,000 to Jensen and $94,000 to Stafford, 15% interest allowances on their investments, and sharing the balance 3:2.

Required:
1. Determine each partner’s share if the first-year profit was $439,000.

2. Independent of (1), determine each partner’s share if the first-year loss was $114,000. (Negative answers should be indicated by a minus sign.)

Expert Solution

Please find below answer :

Part A
Particulars	Jensen	Stafford	Total
Profit			439,000
Salary	169,000	94,000	263,000
Interest on capital	179000*15%	219000*15%
Interest	26850	32850	59700
Total Expenses of Salary &interest	195,850	126,850	322,700
Balance profit			116,300
Ratio 3:2	69,780	46,520
Share of partner	265,630	173,370	439,000

Part B
Particulars	Jensen	Stafford	Total
Profit			(114,000)
Salary	169,000	94,000	263,000
Interest on capital	179000*15%	219000*15%
Interest	26850	32850	59700
Total Expenses of Salary &interest	195,850	126,850	322,700
Balance profit			(436,700)
Ratio 3:2	(262,020)	(174,680)
Share of partner	(66,170)	(47,830)	(114,000)

ekkarill92 answered 1 year ago

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