The Tom, Ben, & Jerry partnership completed its first year of operations, earnin
ID: 2500970 • Letter: T
Question
The Tom, Ben, & Jerry partnership completed its first year of operations, earning a net income of $175,000. Each partner initially contributed $75,000 to the partnership. The partnership agreement provides that Tom receives 20 percent interest on his initial capital balance. Ben receives an annual salary of $80,000 and a 10% bonus on partnership income (before the bonus) above $100,000. Jerry receives 15% interest on his initial capital balance, and a $50,000 salary. Any remaining profits are divided equally. All salaries and bonuses were distributed in cash to the partners.
Use the following tables to determine the net income allocations and ending capital balances for the partners.
Partner
Salary
Bonus
Interest
Balance
Total
Tom
Ben
Jerry
Total
Partner
Beg. Capital
Income
Distributions
End Capital
Tom
Ben
Jerry
Total
Partner
Salary
Bonus
Interest
Balance
Total
Tom
Ben
Jerry
Total
Explanation / Answer
Balance income after salary = 175000- 130000-7500-26250 = 11250
Share in remaining income = 11250 /3 = 3750
salary Bonus Interest Balance Tottal TOM - - 15000 [75000*.20] 3750 18750 Ben 80000 7500 [(175000-100000)*.10] 3750 91250 jerry 50000 11250 [75000*.15] 3750 65000 Total 130000 7500 26250 11250 175000Related Questions
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