Business partners Baliva, Masi, and Romalati have a partnership agreement that outlines a detailed formula for sharing profits and losses. Baliva, Masi, and Romalati earn annual salaries of $60 000, $70 000, and $80 000 respectively. They also earn a fixed percentage of interest on their capital balances which are $50 000, $50 000, and $70 000 respectively. Any remaining income is allocated using an income ratio of 30%, 30% and 40% respectively. Calculate the net income allocation and record the journal entry under the following unrelated situations:

 

(a) net income of $400 000, and 7% on capital balances

(b) net income of $50 000, and 5% on capital balances.

2a)	Baliva	Masi	Romalati	Total
Balance In Capital
Income Ratio
Net Income
Income Distribution
Salary Allowance
Remaining Income/Deficiency
Interest Allowance
Remaining Income/Deficiency
Fixed Ratio
Remaining Income/Deficiency
Division of Net Income

Date	Particulars	PR	Debit	Credit

2b)	Baliva	Masi	Romalati	Total
Balance In Capital
Income Ratio
Net Income
Income Distribution
Salary Allowance
Remaining Income/Deficiency
Interest Allowance
Remaining Income/Deficiency
Fixed Ratio
Remaining Income/Deficiency
Division of Net Income

                             

Date	Particulars	PR	Debit	Credit

Answer rating: 100% (QA)

a Net income of 400000 and 7 on capital balances To calculate the net income allocation we need to follow the partnership agreements formula 1 Calculate the interest allowance based on the fixed perce... View the full answer