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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
and Fitch receive salary allocations of 10,000 and
above 25,000,
partner. Evans
15,000, respectively. If partnership net income
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.
is
Required:
1.
Prepare a schedule to allocate income to the partners assuming
that partnership net income is 250,000.
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