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Jensen and Stafford began a partnership to start a hardwood flooring installation business, by investing $179,000...

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Accounting

Jensen and Stafford began a partnership to start a hardwoodflooring installation business, by investing $179,000 and $219,000,respectively. They agreed to share profits/(losses) by providingyearly salary allowances of $169,000 to Jensen and $94,000 toStafford, 15% interest allowances on their investments, and sharingthe balance 3:2.

Required:
1. Determine each partner’s share if the first-year profitwas $439,000.



2. Independent of (1), determine each partner’sshare if the first-year loss was $114,000. (Negativeanswers should be indicated by a minus sign.)

Answer & Explanation Solved by verified expert
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Please find below answer :

Part A
Particulars Jensen Stafford Total
Profit          439,000
Salary                               169,000                       94,000          263,000
Interest on capital 179000*15% 219000*15%
Interest 26850 32850 59700
Total Expenses of Salary &interest                               195,850                    126,850          322,700
Balance profit          116,300
Ratio 3:2                                 69,780                       46,520
Share of partner                               265,630                    173,370          439,000
Part B
Particulars Jensen Stafford Total
Profit       (114,000)
Salary                               169,000                       94,000          263,000
Interest on capital 179000*15% 219000*15%
Interest 26850 32850 59700
Total Expenses of Salary &interest                               195,850                    126,850          322,700
Balance profit       (436,700)
Ratio 3:2                            (262,020)                  (174,680)
Share of partner                               (66,170)                    (47,830)       (114,000)

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