Rockford Skeeba Tapinski Capital Drawing Сapital Drawing Сapital Drawing Beginning balance February 1. March 31 $75,000 $ 15,000 10,000 $125,000 $ 25,000 5,000 $40,000 $ 10,000 15,000 June 1 10,000 June 30 25,000 15,000 15,000 10,000 September 30 10,000 Ending balance .. $85,000 $45,000 $125,000 $55,000 $50,000 $45,000
Rockford, Skeeba, and Tapinski are partners in a business which manufactures specialty railings. Their
1. Salaries of $50,000, $40,000, and $55,000 for Rockford, Skeeba, and Tapinski, respectively.
2. Skeeba will receive a bonus equal to 5% of sales in excess of $1,000,000.
3. All partners will receive a bonus of 10% of net income in excess of $150,000 after their bonus.
4. Partners will be allocated interest on their weighted-average capital balance to the extent that it exceeds $50,000. Drawings in excess of annual salaries will be considered a reduction in capital. Interest is computed at the rate of 10%.
5. Remaining profits or losses will be allocated 35%, 25%, and 40% to Rockford, Skeeba, and Tapinski, respectively.
6. Gains or losses from the sale of depreciable assets will be excluded from the above provisions and will be equally allocated between Rockford and Tapinski.
Activity in the partners’ capital and drawing accounts during the year was as follows:(attached)
Determine how annual income of $280,000 (including a gain on the sale of equipment of $20,000) should be allocated among the partners. Annual sales revenue was $1,300,000.
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