Xavier, Young, and Zane operate a partnership with a complex profit and loss sharing agreement. The average capital balance for each partner on December 31, 2014 is $300,000 for Xavier, $250,000 for Young, and $325,000 for Zane. An 8% interest allocation is provided to each partner based on the average capital balance on December 31, 2014. Xavier and Young receive salary allocations of $10,000 and $15,000, respectively. If partnership net income is above $25,000, after the salary allocations are considered (but before the interest allocations are considered), Zane will receive a bonus of 10% of the original amount of net income. All residual income is allocated in the ratios of 2:3:5 to Xavier, Young, and Zane, respectively.

Part 1: Prepare a schedule to allocate income to the partners assuming that partnership net income for 2014 is $250,000.

Part 2: Prepare a journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).

Answer rating: 100% (QA)

Part 1 Prepare a schedule to allocate income to the partners assuming that partnership net income fo... View the full answer