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The partnership agreement of Alice, Baron & Crane was formed on January 2, 2017. The original...

The partnership agreement of Alice, Baron & Crane was formed on January 2, 2017. The original cash investments were as follows:

Alice                $    96,000

Baron                  144,000

Crane                    216,000

According to the partnership contract, the partners were to be remunerated as follows:

  1. Salaries of $14,400 for Alice, $12,000 for Baron, and $13,600 for Crane.
  2. Interest at 12% on the average capital account balances during the year.
  3. Remainder divided 40% to Alice, 30% to Baron and 30% to Crane.

Income before partner withdrawals during the year ended December 31, 2017 was $92,080. During 2017 Alice invested additional capital of $24,000 in the partnership on July 1; Crane withdrew capital of $36,000 from the partnership on October 1. Each of the partners had monthly withdrawals of $1,250 against their shares of income for the year.

REQUIRED: Prepare a schedule showing the allocation of the partnership income to each partner.

Solutions

Expert Solution

Schedule showing allocation of partnership income.

alice Baron Crane
a.Original investments 96000 144000 216000
additions 240000
withdrawals (36000)
total 120000 144000 180000
b. Average capital

120000/2

=60000

 144000

180000/2

=90000
c.Interest @12%*(b) 7200 17280 10800
d.Salary 14400 12000 13600
e.% of profit sharing 40% 30% 30%
f. Profit

92080*40%

=36832

92080*30%

=27624

92080*30%

=27624
g.Monthly withdrawals against income

1250*12

=15000

1250*12

=15000

1250*12

=15000

h.Final payment to partner on profit [f-g]

 21832 12624 12624

ekkarill92 answered 3 years ago
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