Problem NO: 28

Jhumpa, Stewart, and Kelly are all one-third partners in the capital and profits of Firewalker General Partnership. In addition to their normal share

Jhumpa, Stewart, and Kelly are all one-third partners in the capital and profits of Firewalker General Partnership. In addition to their normal share of the partnership’s annual income, Jhumpa and Stewart receive an annual guaranteed payment of $10,000 each to compensate them for additional services they provide. Firewalker’s income statement for the current year reflects the following revenues and expenses:

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Sales revenue $340,000

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Interest income 3,300

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Long-term capital gains 1,200

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Cost of goods sold (120,000)

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Employee wages (75,000)

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Depreciation expense (28,000)

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Guaranteed payments (20,000)

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Miscellaneous expenses (4,500)

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Overall net income $97,000

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