Net Income for Costmore Sales for the Year Ended December

question 74

Short Answer

Net income for Costmore Sales for the year ended December 31, 2019, was $86,000.
The partners, Johnson and Lindstrom, share profits in the ratio of 60/40, respectively. The balance in Johnson's capital account is $60,000. The balance in Lindstrom's capital account is
$60,000.
1. How much of the net income will be allocated to Johnson?
2. How much of the net income will be allocated to Lindstrom?

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Definitions:

Repurchasing Stock

The process whereby a corporation repurchases its own shares from the market, thereby decreasing the total number of shares available.

Horizon Value

The value of a company or investment at the end of a specified period, considering future growth and cash flows.

Capital Structure

Capital Structure refers to the mix of debt and equity financing a company uses to fund its operations and growth, influencing its risk profile and cost of capital.

Free Cash Flows

This refers to the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It is an indicator of a company's financial flexibility.