Question

Champion Play Company is a partnership that sells sporting goods. The partnership agreement provides for 10 percent interest on invested capital, salaries of $24,000 to Luc and $28,000 to Dennis, and a bonus for Luc. The 20X3 capital accounts were as follows:



Required
For each of the following independent situations, prepare an income distribution schedule.
a. Interest is based on weighted-average capital balances. The 5 percent bonus is calculated on net income after deducting the bonus. In 20X3, net income was $64,260. Any remainder is divided between Luc and Dennis in a 3:2 ratio, respectively.
b. Interest is based on ending capital balances after deducting salaries, which the partners normally withdraw during the year. The 8 percent bonus is calculated on net income after deducting the bonus and salaries. Net income was $108,700. Any remainder is divided equally.
c. Interest is based on beginning capital balances. The 12.5 percent bonus is calculated on net income after deducting the bonus. Net income was $76,950. Any remainder is divided between Luc and Dennis in a 4:2 ratio,respectively.


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  • CreatedMay 23, 2014
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