The capital balance on January 1, 2020, for Carraway and Boos was $90,000 and $120,000, respectively. During 2020, the Carraway and Boos Partnership had sales of $495,000, cost of goods sold of $290,000, and operating expenses of $85,000. Prepare an income statement for the Carraway and Boos Partnership for the year ended December 31, 2020. As a part of the income statement, include a Division of Net Income to each of the partners.

Carraway and Boos Partnership

Income Statement for the year ended December 31, 2020:

Sales Revenue      $495,000

Cost of goods sold 290,000

Gross profit           $205,000

Operating expense  85,000

Net income           $120,000

Appropriation of Net Income:

                                 Carraway      Boos

Share of net income $51,429     $68,571

                  ($120,000 * 3/7)    ($120,000 * 4/7)

Explanation:

a) Data and Calculations:

                             Carraway      Boos

Capital balances  $90,000   $120,000

Ratio of capital       3                    4

The partnership uses the partners' capital balances to share the net income, in the absence of a contrary agreement or net income (loss) sharing ratio.