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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.

  1. You will have two partners -> give them each a name
  2. Define each partner's original investment amounts
  3. Define the amount of revenues earned and the amount of expenses incurred for the period.
  4. Determine the amount of net income to be distributed between the two partners based on your numbers in step 3.
  5. 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
  6. 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.
  7. 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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