Question

C. Eastwood. A North, and M. West are manufacturers' representatives in the architecture business. Their capital accounts in the ENW partnership for 20X1 were as follows: C. Eastwood, Capital 9/1 9,300 1/11 30.400 7,500 A North, Capital 3/1 9.400 1/1 7/1 9/1 40,600 6,500 5.700 M. West, Capital 8/1 13,700 1/1 4/1 6/1 50,600 8,500 4.400 Required: For each of the following independent income-sharing agreements, prepare an income distribution schedule a. Salaries are $16.200 to Eastwood, $21,800 to North and $19 800 to West Eastwood receives a bonus of 5 percent of net income after deducting his bonus. Interest is 10 percent of ending capital balances. Eastwood, North, and West divide any remainder in a 3:3 4 ratio, respectively. Net income was $78.540 (Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign.) Eastwood North West Total Profit ratio 13 10 Ending capital Net income Salary Bonus 0 Interest on ending capital balance Residual income (deficit) $ Allocate 0 0 Total HA b. Interest is 10 percent of weighted-average capital balances. Salaries are to North, and $25,800 to West. North receives a bonus of 10 percent of net income after deducting the bonus and her salary. Any remainder is divided equally. Net income was intermediate calculations. Round the final answers to nearest whole dollar. Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign.) $24,900 to Eastwood, $21,700 $68.780 (Do not round Eastwood West North Total Profit ratio Average capital Net income Interest on average capital balance Salary Bonus Residual income (deficit) $ 0 Allocate 0 0 Total c. West receives a bonus of 20 percent of net income after deducting the bonus and the salaries. Salaries are $21.200 to Eastwood, $18.900 to North, and $16.400 to West. Interest is 10 percent of beginning capital balances. Eastwood, North, and West divide any remainder in an 8:7:5 ratio, respectively. Net income was $95,560. (Donot round intermediate calculations. Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign.) Eastwood North West Total Profit ratio Beginning capital Net income Bonus Salary Interest on beginning capital balance Residual income (deficit) Allocate $ $ Total

Answer 1

Eastwood West North Total a Profit Ratio Ending Capital Net Income Salary Bonus 3 3 4 10 49,800 28,600 43,400 121,800 78,540 21,800 16,200 19,800 57,800 3,740 3,740 ending capital balance Residual Income (deficit) Interest on 4,340 4,980 12,180 2,860 4,820 Allocate 1,446 1,446 1,928 4,820 Total 24,246 27,586 26,708 78,540 Eastwood Working Note North West Ending Capital 49800 28600 43400 (40600+6500+57 (50600+8500+440 0-13700) (30400+7500-9300) 00-9400) Bonus to Eastwood 3740 (78540/105*5)

Eastwood West b) Profit Ratio Average capital Net Income Interest on Total North 1 1 1 3 37,917 124,050 32,300 53,833 68,780 12,405 3,230 Avrage capital balance 3,792 5,383 Salary 25,800 72,400 4,280 24,900 21,700 Bonus 4,280 Residual Income (deficit) Allocate (20,305) (20,305) (6,768) (6,768) (6,768.33) Total 21,362 23,003 24,415 68,780

Eastwood Working Note Weighted average capital No of month used Weighted in business captal (1) (2) 3=(1*2) Beginning Capital (1/1 to 5/1) Additional capital (5/1 to 9/1) Withdrawal on (9/1 - 9300 (9/1 to 12/31) 30400 4 121600 on 5/1 -7500 37900 4 151600 C 28600 4 114400 Total 387600 12 Weighted average capital= 387600/12= 32300

North No of month used Weighted in business captal (1) (2) 3=(1 2) Beginning Capital (1/1 to 3/1) Withdrawal on (3/1 - 9400 40600 2 81200 (3/1 to 7/1) Additional capital (7/1 to 9/1) Additional capital (9/1 to 12/31) 31200 124800 4 on 7/1 -6500 75400 37700 2 on 9/1 -5700 173600 43400 4 Total 12 455000 Weighted average capital= 455000/12=37917

West No of month used Weighted in business captal (1) (2) 3=(1*2) Beginning Capital (1/1 to 4/1) Additional capital on 4/1 -8500 (4/1 to 6/1) 50600 3 151800 59100 2 118200 Additional capital on 6/1 -4400 (6/1 to 8/1) Withdrawal on (8/1 - 13700 63500 2 127000 (8/1 to 12/31) 49800 249000 Total 12 646000 Weighted average capital= 646000/12=53833

Bonus to North Net Income 68780 Less: Her Salary 21700 47080 Bonus (47080/110 10) 4280 Eastwood Total North West Profit Ratio Beginning Capital Net Income 8 5 20 30,400 40,600 50,600 121,600 95,560 Salary Bonus 18,900 21,200 16,400 56,500 6,510 6,510 ending capital balance Interest on 3,040 4,060 5,060 12,160 20,390 Residual Income (deficit) Allocate Total 5,098 33,068 8,156 7,137 20,390 95,560 32,396 30,097

Bonus to West Net Income 95560 Less: Total Salary 56500 39060 Bonus (47080/120*20) 6510