Bloom and Carnes share profits and losses in a ratio of 2:3, respectively. Bloom and Carnes receive salary allowances of $10,000 and $20,000, also respectively, and both partners receive 10% interest based upon the balance in their capital accounts on January 1. Partners’ drawings are not used in determining the average capital balances. Total net income for 2021 is $60,000. If net income after deducting the interest and salary allocations is greater than $20,000, Carnes receives a bonus of 5% of the original amount of net income.
Bloom and Carnes share profits and losses in a ratio of 2:3, respectively. Bloom and Carnes receive salary allowances of $10,000 and $20,000, also respectively, and both partners receive 10% interest based upon the balance in their capital accounts on January 1. Partners’ drawings are not used in determining the average capital balances. Total net income for 2021 is $60,000. If net income after deducting the interest and salary allocations is greater than $20,000, Carnes receives a bonus of 5% of the original amount of net income.
Chapter4: Gross Income: Concepts And Inclusions
Section: Chapter Questions
Problem 43P
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Question
Bloom and Carnes share profits and losses in a ratio of 2:3, respectively. Bloom and Carnes receive salary allowances of $10,000 and $20,000, also respectively, and both partners receive 10% interest based upon the balance in their capital accounts on January 1. Partners’ drawings are not used in determining the average capital balances. Total net income for 2021 is $60,000. If net income after deducting the interest and salary allocations is greater than $20,000, Carnes receives a bonus of 5% of the original amount of net income.
Bloom Carnes
January 1 capital balances $ 200,000 $ 300,000
Yearly drawings ($1,500 a month) 18,000 18,000
A. What are the total amounts for the allocation of interest, salary, and bonus, and, how much over-allocation is present?
B. If the partnership experiences a net loss of $20,000 for the year, what will be the final amount of profit or (loss) closed to each partner’s capital account?
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