Karen Cooper and Alex Orme formed a partnership on May 1,
Question and Solution
Karen Cooper and Alex Orme formed a partnership on May 1, 20-1. Cooper contributed $80,000 and Orme contributed $50,000. During the year, Cooper contributed an additional $20,000. The partnership agreement states that Cooper is to receive $30,000 and Orme is to receive $60,000 as a salary allowance. Any remaining net income is to be divided as follows: Cooper, 20% and Orme, 80%. The partnership earned net income of $140,000 for the fiscal year ending April 30, 20-2. During the first year of operation, Cooper and Orme withdrew $30,000 and $50,000, respectively. 1. Prepare the lower portion of the income statement showing the allocation of net income between Cooper and Orme for the fiscal year ended April 30, 20-2. 2. Prepare a statement of partners’ equity showing each individual partner’s equity for the fiscal year ended April 30, 20-2.