Question

The capital balance on January 1, 2020, for Carraway and Boos was $90,000 and $120,000, respectively. During 2020, the Carraway and Boos Partnership had sales of $495,000, cost of goods sold of $290,000, and operating expenses of $85,000. Prepare an income statement for the Carraway and Boos Partnership for the year ended December 31, 2020. As a part of the income statement, include a Division of Net Income to each of the partners.

Answer 1

Carraway and Boos Partnership

Income Statement for the year ended December 31, 2020:

Sales Revenue $495,000

Cost of goods sold 290,000

Gross profit $205,000

Operating expense 85,000

Net income $120,000

Appropriation of Net Income:

Carraway Boos

Share of net income $51,429 $68,571

($120,000 * 3/7) ($120,000 * 4/7)

Step-by-step explanation:

a) Data and Calculations:

Carraway Boos

Capital balances $90,000 $120,000

Ratio of capital 3 4

The partnership uses the partners' capital balances to share the net income, in the absence of a contrary agreement or net income (loss) sharing ratio.