Reference no: EM132565469
Question - Florence, Kilara and Medika are 3 sisters who formed a partnership on 1 July 2018 to manufacture culturally-relevant textiles. Their equity in the partnership is as follows:
Capital - Florence = $140,000
Capital - Kilara. = $80,000
Capital - Medika. = $30,000
Retained Earnings - Florence = $17,500
Retained Earnings - Kilara = $22,000
Retained Earnings - Medika = $16,000
The partnership agreement provides for the following:
Salary of $55,000 to be paid to Florence as manager. Killara and Medika each receive an annual salary of $50,000 for their respective roles in the partnership.
Interest to be charged at 8% per annum on opening capital balances.
Interest on annual drawings is charged at 10% per annum. During the year Florence withdrew $7,500, Kilara withdrew $12,000 and Medika withdrew $10,000.
Residual profits are shared in proportion to each partner's initial capital balances.
Partnership profit at 30 June 2019 totalled $220,000.
Required - A schedule for the allocation of partnership profit based on the above partnership agreement and determine the total profit to be allocated to each partner.