Allocation of profit to partners Assume that there are three partners in a partn

Question

Allocation of profit to partners
Assume that there are three partners in a partnership, A, B, and C. Partner C provides services to the partnership and is entitled to a salary of $200,000. Assume that the partnership revenues less expenses (other than salary to Partner C) amount is $500,000. Finally, assume that the Partnership Agreement provides for a sharing ratio of 40%/40%/20% for Partners A, B, and C, respectively. Prepare a schedule for the allocation of profit to the partners.

Fill in for all the ? Symbols:

A
B
C Total
Allocation
Remaining Allocation of Profit to Partners: Excess of revenues over expenses ? Sal ? ? ? Allocation of residual profit ? ? ? ? ? Total allocation ? ? ? ?

Explanation / Answer

A B C Total Allocation Remaining Allocation of Profits to partner Excess of Revenue over expenses          5,00,000 Salary        2,00,000       2,00,000          3,00,000 Allocation of Residual Profit ( 40:40:20)        1,20,000        1,20,000            60,000       3,00,000                       -   Total Allocation        1,20,000        1,20,000        2,60,000       5,00,000                       -

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