Xavier, Young, and Zane operate a partnership with a complex profit and loss sharing agreement. The average capital balance for each partner on December 31, 2014 is $300,000 for Xavier, $250,000 for Young, and $325,000 for Zane. An 8% interest allocation is provided to each partner based on the average capital balance on December 31, 2014. Xavier and Young 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), Zane 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 Xavier, Young, and Zane, respectively. Please prepare a schedule to allocate income to the partners if the partnership net income for 2014 is $250,000 and prepare a journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Xavier, Young, and Zane operate a
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