C. Eastwood, A. North, and M. West are manufacturers representatives in the architecture business. Their capital accounts
Question:
Required
For each of the following independent income-sharing agreements, prepare an income distribution schedule.
a. Salaries are $15,000 to Eastwood, $20,000 to North, and $18,000 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 $78,960.
b. Interest is 10 percent of weighted-average capital balances. Salaries are $24,000 to Eastwood, $21,000 to North, and $25,000 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 $68,080.
c. West receives a bonus of 20 percent of net income after deducting the bonus and the salaries. Salaries are $21,000 to Eastwood, $18,000 to North, and $15,000 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$92,940.
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Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker