Exercise $6($LO $4)$Evaluating alternative profit allocation formulas. Banyan and Schultz operate a residential construction firm as a partnership and are considering admitting Witkowski as a partner. Witkowski has recently attended a seminar on the formation and management of partnerships and is proposing that the profit$-$sharing arrangement of the new partnership include a number of variables as follows:

a$.$ Banyan, Schultz, and Witkowski receive salaries of $$120,000,$ $$80,000,$ and $$40,000,$ respectively.

b$.$ Witkowski receives a bonus of $5\%$ on all income in excess of $$200,000$ and up to and including $$260,000$ and a bonus of $10\%$ on income in excess of $$260,000.$

c$.$ All partners are to maintain a minimum capital balance of $$50,000$ and will receive intereston this balance at the rate of $10\%$ on the minimum balance.

d$.$ Any residual amounts of profit are to be divided equally between the partners.e$.$ If profits are not adequate to complete the above provisions, no order of priority is to befollowed.

Banyan and Schultz had been sharing profits per their profit and loss ratios of $60\%$ and$40\%,$ respectively, and had proposed to Witkowski that the new partnership allocate profits per the profit and loss ratios of $45\%,30\%,$ and $25\%$ for Banyan, Schultz, and Witkowski, respectively. The original partners are not convinced that Witkowski$$s proposal is worth the trouble. Furthermore, they are concerned that they will not fare as well under Witkowski$$s proposal as compared to their proposal. Banyan and Schultz believe that the new partnership should generate income of $$250,000$ in its first year and grow by $20\%$ in each of the two subsequent years in large part due to the admission of Witkowski as a partner. Assuming that the new partnership were to adopt Witkowski$$s proposed agreement for a $3-$year period, prepare a schedule to compare the Witkowski proposal against that being proposed by the original partners.