Question

Kindrob Company reports a profit of $144,000 for the year ended May 31, 2024. The partnership agreement specifies (1) salary allowances of $60,000 for K. Kindle and $48,000 for M. Roberts, (2) an interest allowance of 10% on average capital investments, and (3) a remaining profit-sharing ratio of 40% to Kindle and 60% to Roberts.

Please calculate the distribution of profits to K. Kindle and M. Roberts based on the partnership agreement and the specified profit-sharing ratio

Answer 1

Based on the partnership agreement and the specified profit-sharing ratio, K. Kindle will receive $14,400 and M. Roberts will receive $21,600 as their distribution of profits.

Step-by-step explanation:

The profit distribution for K. Kindle and M. Roberts can be calculated as follows:

1. Calculate K. Kindle's salary allowance: $60,000.
2. Calculate M. Roberts' salary allowance: $48,000.
3. Calculate the total salary allowances: $60,000 + $48,000 = $108,000.
4. Calculate the remaining profit after deducting the salary allowances: $144,000 - $108,000 = $36,000.
5. Calculate K. Kindle's share of the remaining profit: 40% of $36,000 = $14,400.
6. Calculate M. Roberts' share of the remaining profit: 60% of $36,000 = $21,600.

Therefore, based on the partnership agreement and the specified profit-sharing ratio, K. Kindle will receive $14,400 and M. Roberts will receive $21,600 as their distribution of profits.