Naomi and Petri are partners in a tennis shop. They have agreed that Naomi will operate the store and receive a salary of $104,000 per year. Petri will receive 10 percent interest on his average capital balance during the year of $500,000. The remaining income or losses are to be shared by Naomi and Petri in a 2:3 ratio.

Required

Determine each partner’s share of income and losses under each of the following conditions. In each case, the income or loss is stated before the distribution of salary and interest.

1. Income was $168,000.

2. Income was $88,000.

3. The loss was $25,600.