Question

McGill and Smyth have capital balances on January 1 of $60,000 and $48,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $16,000 for McGill and $20,000 for Smyth, (2) interest at 10% on beginning capital balances, and (3) remaining income or loss to be shared 60% by McGill and 40% by Smyth. Exercise 12-04 a-b (Part Level Submission) (Video) McGill and Smyth have capital balances on January 1 of $60,000 and $48,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $16,000 for McGill and $20,000 for Smyth, (2) interest at 10% on beginning capital balances, and (3) remaining income or loss to be shared 60% by McGill and 40% by Smyth. (a) (1) Prepare a schedule showing the distribution of net income, assuming net income is $67,000. (If an amount reduces the account balance then enter with a negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) DIVISION OF NET INCOME McGill Smyth Total Salary allowance Interest allowance Total salaries and interest Remaining income / deficiency Total division of net income

Answer 1

Requirement: (1) Division of Net income MCGill Salary allowances 16000 Interest allowance 6000 Total Salaries and Interest 22000 Remaining income / deficiency 12120 Total Division of net income 34120 Smyth 20000 4800 24800 8080 32880 Total 36000 10800 46800 202001 67000) Requirement: (2) Division of Net income MCGill Salary allowances 16000 Interest allowance 6000 Total Salaries and Interest 22000 Remaining income / deficiency -13680 Total Division of net income 8320 Smyth 20000 4800 24800 -9120 15680 Total 36000 10800 46800 24000