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Hi, I have a question in F3 partnership can you help me to settle it?
X,Y and Z are in partnership, sharing profits in the ratio 2:2:1. X is allowed an annual salary of $10000. Y has made a loan to the partnership on which the partnership pays interest of $5000 each year. Profit fo the year before appropriations is $150000.
What is Z’s total appropriaion of profit for the year?
My answer is $27000 but the exact answer is $28000 can you explain it to me?
TQWhy is this in the Paper F9 forum?
Also, although I will answer your question, partnership is no longer in the syllabus for Paper F3!
The profit of 150000 is the profit after charging the loan interest (even though the loan is from a partner, the interest will be charged in the income statement in arriving at the profit to appropriate.
Of the 150,000, 10000 is to X, which leaves 140000 to be shared in the profit sharing ratio. Z gets 1/5, which is 28,000.
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