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Create a problem on distributing net income between partners in a partnership. You will have two partners -> give them each a name Define each
Create a problem on distributing net income between partners in a partnership.
- You will have two partners -> give them each a name
- Define each partner's original investment amounts
- Define the amount of revenues earned and the amount of expenses incurred for the period.
- Determine the amount of net income to be distributed between the two partners based on your numbers in step 3.
- Create an income-sharing agreement that includes the following:
- Interest allowance on original investments -> you determine % of interest allowance
- Salary allowances -> you determine if one or both partners will get a salary allowance
- Define in what ratio the remainder will be shared between the partners - the ratio cannot be 1:1
- Provide the calculations to distribute the net income you defined in step 4 using the requirements you defined in step 5. You may want to do this in Excel and attach the spreadsheet to your post.
- Provide the journal entry to increase each partner's capital accounts by the amount of net income being distributed to the partner.
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