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Jill and Tilly Masterson share the same last name, but are not related. They met each other a number of years previously when they attended

Jill and Tilly Masterson share the same last name, but are not related. They met each other a number of years previously when they attended the Canadian Memorial Chiropractic College in Toronto. Last year, they discovered that both had moved to Edmonton and, over coffee, they learned that neither was happy in the practice where they work. They decided to start a partnership and go out on their own. Masterson Chiropractic Services started business at the beginning of the current year.

Jill contributed most of the capital for the new partnership, so it was determined that she will receive 75 per cent of any capital gains or dividends received by the partnership. The partnership agreement was set up at the beginning of 20XX and calls for business income to be shared equally. Because local interests are important to both of them, the partnership makes some charitable contributions, which are also shared equally per the agreement.

For the year ending December 31, 20XX, their results, prepared on a GAAP basis, are as follows:

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Masterson Chiropractic Services Partnership Income Statement Year Ending December 31, 20XX Revenues $1,000,000 Expenses: Office rent $ 84,000 Office supplies 15,000 Amortization 32,000 Business meals and entertainment 18,000 Charitable donations 28,000 Staff salaries 70.000 Salary to Jill 175,000 Salary to Tilly 175,000 597,000 Net Business Income $403,000 Other income: Capital gains $ 15,000 Eligible Dividends Received 25,000 40.000 Accounting net income $443,000

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