Question

weyganat, Accounting Principles, 12 Help System Announcements PRINTER VERSION 4 BACK N Exercise 12-4 (Part Level Submission) McGill and Smyth have capital balances on January 1 of $41,000 and $4,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $25,000 for McGill and $17,000 for Smyth, (2) interest at 12% 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 $85,000. (If an amount reduces the account balance then enter with a negative sign preceding the number or parenthesis, ..-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 $ (2) Prepare a schedule showing the distribution of net income, assuming net income is $23,000. (If an amount reduces the account balance then enter with a negative sign preceding the number or parenthesis, ..-15,000, (15,000).) DIVISION OF NET INCOME McGill Smyth Total Salary allowance $

Answer 1

1)
	McGill	Smyth	Total
Salary allowance	$ 25,000	$ 17,000	$ 42,000
Interest allowance	$ 4,920 ( $ 41,000 x 12% )	$ 4,080 ( $ 34,000 x 12% )	$ 9,000
Total salaries and interest	$ 29,920	$ 21,080	$ 51,000
Remaining income / deficiency	$ 20,400 ( $ 34,000 x 60% )	$ 13,600 ( $ 34,000 x 40% )	$ 34,000 ( $ 85,000 (-) $ 51,000 )
Total division of net income	$ 50,320	$ 34,680	$ 85,000

2)
	McGill	Smyth	Total
Salary allowance	$ 25,000	$ 17,000	$ 42,000
Interest allowance	$ 4,920 ( $ 41,000 x 12% )	$ 4,080 ( $ 34,000 x 12% )	$ 9,000
Total salaries and interest	$ 29,920	$ 21,080	$ 51,000
Remaining income / deficiency	($ 16,800) ( $ 28,000 x 60% )	($ 11,200) ( $ 28,000 x 40% )	($ 28,000) ( $ 23,000 (-) $ 51,000 )
Total division of net income	$ 13,120	$ 9,880	$ 23,000