Joanne and Diane have a partnership in The Luxury Flooring Company. The partnership agreement includes the following provisions regarding sharing profit or loss:
1. A salary allowance of $ 90,000 to Joanne and $ 65,000 to Diane.
2. An interest allowance of 7% on capital balances at the beginning of the year.
3. The remainder to be divided 60% to Joanne and 40% to Diane.
The capital balances on January 1, 2021, for Joanne and Diane were $ 480,000 and $ 1,000,000, respectively. During 2021, The Luxury Flooring Company had sales of $ 1,200,000, cost of goods sold of $ 417,000, and operating expenses of $ 335,000.
Instructions
Prepare an income statement for The Luxury Flooring Company for the year ended December 31, 2021. As a part of the income statement, include a division of profit to each of the partners.

Question

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The Answer of Joanne and Diane have a partnership in The Luxury Flooring Company. The partnership agreement includes the following provisions regarding sharing profit or loss:
1. A salary allowance of $ 90,000 to Joanne and $ 65,000 to Diane.
2. An interest allowance of 7% on capital balances at the beginning of the year.
3. The remainder to be divided 60% to Joanne and 40% to Diane.
The capital balances on January 1, 2021, for Joanne and Diane were $ 480,000 and $ 1,000,000, respectively. During 2021, The Luxury Flooring Company had sales of $ 1,200,000, cost of goods sold of $ 417,000, and operating expenses of $ 335,000.
Instructions
Prepare an income statement for The Luxury Flooring Company for the year ended December 31, 2021. As a part of the income statement, include a division of profit to each of the partners.

Joanne and Diane Have a Partnership in the Luxury Flooring