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PROBLEM #2-10 POINTS Reykjavik and Keflavik have a partnership agreement which includes the tolowing provisions regarding the allocation of net income or net loss: 1. A salary allowance of $48,000 to Revkjavik and $36,000 to Keflavik. 2. An interest allowance of 10% on capital balances 3. The remainder to be divided 70% to Reykjavik and 30% to The ca at the beginning of the year. Keflavík. pital bal lance on January 1, 2017, for Reykjavik and Keflavik was $90,000 and $120,000, respectively. During 2017,the Reykjavik and Keflavik Partnership had sales of $495,000, cost of goods sold of $290,000, and operating expenses of $85,000. Instructions YOU MUST SHOW YOUR WORK FOR EACH PART Prepare proper schedules: (1) For the calculation of Net Income of the Partnership for the year ended December 31, 2017 (2) For the allocation of the Net Income between Reykjavik and Keflavik for the year ended December 31, 2017.
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Problem No. 2 (1)Sol: Calculation of Net income of Partnership for the year ended 31st december,2017, Particulars Amt. in $ Sales Less Cost of Goods Sold Gross Profit Less:Operating Expenses Net Income 495000 290000 205000 85000 120000(2)Sol: Statement Showing the allocation of Net Income Between Raykjavik and Keflavik for the Year ending 31st december,2017.(in a Tabular Form) Raykjavik Amt. in $ Particulars Ratio Keflavik Total Amt. in $ Salary allowance Interest allowance Given 10% on Opening capital 48000 9000 Amt. in $ 36000 84000 12000 21000 ($90000*10%) ($120000*10%) Outstanding Balance Ratio in 70:30 10500 4500 15000 ($15000 70/10o) 15000 30/100]] 67500 52500 120000Working Notes: 1 Calculation of Outstanding Balance: Amt. in $ 120000 Particulars Net Income Less: Salary Allowance Interest Allowance Outstanding Balance 84000 21000 15000

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