Evans, Fitch, and Gault operate a partnership with a complex profit and loss sharing agreement. The average capital balance for each partner on December 31, 2006 is 300,000 for Evans, 250,000 for Fitch, and 325,000 for Gault. An 8% interest allocation is provided to each partner. Evans and Fitch receive salary allocations of 10,000 and 15,000, respectively. If partnership net income is above 25,000, after the salary allocations are considered (but before the interest allocations are considered), Gault will receive a bonus of 10% of the original amount of net income. All residual income is allocated in the ratios of 2:3:5 to Evans, Fitch, and Gault, respectively. Required: 1. Prepare a schedule to allocate income to the partners assuming that partnership net income is 250,000.
Evans, Fitch, and Gault operate a partnership with a complex profit and loss sharing agreement. The average capital balance for each partner on December 31, 2006 is 300,000 for Evans, 250,000 for Fitch, and 325,000 for Gault. An 8% interest allocation is provided to each partner. Evans and Fitch receive salary allocations of 10,000 and 15,000, respectively. If partnership net income is above 25,000, after the salary allocations are considered (but before the interest allocations are considered), Gault will receive a bonus of 10% of the original amount of net income. All residual income is allocated in the ratios of 2:3:5 to Evans, Fitch, and Gault, respectively. Required: 1. Prepare a schedule to allocate income to the partners assuming that partnership net income is 250,000.
Chapter10: Partnerships: Formation, Operation, And Basis
Section: Chapter Questions
Problem 2BCRQ
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