Concept explainers
Concept Introduction:
People start their own business and select the form of organization depending upon their need and kind of their business.
The average annual profit of the new partnership for accepting the idea of admission by B.
Answer to Problem 8.1E
The required average annual profit to accept the idea of new admission is
Explanation of Solution
The statement for the allocation of income is as below:
Particular | Mr. A | Mr. B | Mr. C | Total |
Salaries | ||||
Bonus to A | ||||
Remaining Profit | ||||
Income allocation |
- Calculation of bonus to A:
- Calculation of remaining profits and losses is as follows:
Calculation of bonus is as below:
Details | Amount ($) | Amount ($) | Amount ($) |
Net income | - | - | |
Less: Partner salaries | |||
Mr. A | |||
Mr. B | |||
Mr. C | |||
Less: Partner’s bonus | |||
Mr. A | |||
This profit should be allocated between A, B and C in the ratio of
Mr. R share:
Particular | Mr. A | Mr. B | Mr. C | Total |
Remaining profit |
Alternative
The statement for the allocation of income after admission is as below:
Particular | Mr. A | Mr. B | Mr. C | Mr. D | Total |
Salaries | |||||
Bonus to D | |||||
Remaining Profit | |||||
Income allocation |
As per the table drawn above, the remaining allocated to B is
Note: Calculation of remaining profits and losses is as follows:
Details | Amount ($) | Amount ($) | Amount ($) |
Net income | - | - | |
Less: Partner salaries | |||
Mr. A | |||
Mr. B | |||
Mr. C | |||
Mr. D | |||
Less: Partner’s bonus | |||
Mr. D | |||
This profit of
Mr. R share:
Particular | Mr. A | Mr. B | Mr. C | Mr. D |
Remaining profit |
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Chapter 14 Solutions
Advanced Accounting
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