Question
Stephanie Barnes and Layla Taylor formed a partnership, Design Pros Imaging, last May. Each person contributed assets to the business and both partners work full-time
Stephanie Barnes and Layla Taylor formed a partnership, Design Pros Imaging, last May. Each person contributed assets to the business and both partners work full-time in the business. The business made a profit in the first year, which ended Dec. 31, but Layla and Stephanie are still discussing how to divide the net income equitably. Below is a table showing some options that their accountant worked up.
Another designer, Chad Mineart, joined the partnership on January 1, after all assets were adjusted to their market values. He is hoping to work in the business next year. The journal entries to record his admission are shown below.
Assume that Layla and Stephanie have decided to adopt Option D on the Design Pros Imaging panel. They are wondering how the division of net income under Option D will change with the new partner. Assume that income is the same as the prior year. Chad will not have a salary allowance the first year, but any remaining net income will be shared equally among the partners. Using last years data as an example, extend Option D to allow for Chads participation. What would Chads share of the net income be?
Partner Option Taylor Barnes A. 8,800 S43,200 B. 000 $24,000 C. $6,660 $9,420 33,552 22,368 $40,212 $31,788 D. 33,500 S29,500 6,660 9,420 -1,770 -5,310 $38,390 $33,610 E. 33,500 S29,500 1,350 3,825 3825 $37,325 $34,675 F 36,000 $36,000 G. $6,660 $9,420 10,800 11,280 33,840 $28,740 $43,260Step by Step Solution
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