The partnership measurement of Dan, Helen, and Brandie provides that profits are

Question

The partnership measurement of Dan, Helen, and Brandie provides that profits are to be divided as follows: Brandie receives a salary of $15.000 and Helen receives a salary of $9.000 for time spent in the business All partners receive 10% interest on average capital balances. Remaining profits and losses are divided equally among the three partners On January 1. 2010 the capital balances were Dan $120.000. Helen $85,000, and Brandie $75,000. Dan invested an additional $5,000 on July 1 and withdrew $7 000 on October 1. Prepare a schedule to allocate partnership net income of $25.000 for 2010.

Explanation / Answer

Schedule to allocate partnership net income Dan Helen Brandie Total Salary $9,000 $15,000 $24,000 Interest on capital $11,900 $8,500 $7,500 $27,900 Loss distribution equally -$8,967 -$8,967 -$8,967 -$26,900 Calculation of average capital balances & Interest on capital Dan Helen Brandie Balance as on 1.1.2010 $1,20,000 $85,000 $75,000 (+) Additional capital $5,000 $0 $0 (-) Capital with drawn $7,000 Closing capital balances $1,18,000 $85,000 $75,000 Average capital balances $1,19,000 $85,000 $75,000 Interest on capital @ 10% $11,900 $8,500 $7,500 Loss to be distributed among partners Net Income $25,000 Less : Salaries to partners $24,000 Less : Interest on capital $27,900 Loss -$26,900

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