C. Eastwood, A. North, and M. West are manufacturers’ representatives in the arc

Question

C. Eastwood, A. North, and M. West are manufacturers’ representatives in the architecture business. Their capital accounts in the ENW partnership for 20X1 were as follows:

For each of the following independent income-sharing agreements, prepare an income distribution schedule.

Salaries are $16,200 to Eastwood, $20,500 to North, and $19,500 to West. Eastwood receives a bonus of 5 percent of net income after deducting his bonus. Interest is 10 percent of ending capital balances. Eastwood, North, and West divide any remainder in a 3:3:4 ratio, respectively. Net income was $77,700. (Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign.)

Interest is 10 percent of weighted-average capital balances. Salaries are $25,000 to Eastwood, $21,800 to North, and $26,300 to West. North receives a bonus of 10 percent of net income after deducting the bonus and her salary. Any remainder is divided equally. Net income was $68,990. (Do not round intermediate calculations. Round the final answers to nearest whole dollar. Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign.)

West receives a bonus of 20 percent of net income after deducting the bonus and the salaries. Salaries are $22,100 to Eastwood, $18,300 to North, and $15,400 to West. Interest is 10 percent of beginning capital balances. Eastwood, North, and West divide any remainder in an 8:7:5 ratio, respectively. Net income was $95,160. (Do not round intermediate calculations. Amounts that are to be deducted from an individual partner's capital balance should be entered with a minus sign.)

C. Eastwood, A. North, and M. West are manufacturers’ representatives in the architecture business. Their capital accounts in the ENW partnership for 20X1 were as follows:

Explanation / Answer

a. C.Eastwood capital Date Debit Date Credit 01-Sep 9500 01-Jan 31100 01-May 6400 9500 37500 End.Bal 28000 A. North capital Date Debit Date Credit 01-Mar 9400 01-Jan 41000 01-Jul 6000 01-Sep 5600 9400 52600 End.Bal 43200 M. West capital Date Debit Date Credit 01-Aug 13800 01-Jan 51600 01-Apr 8300 01-Jun 4000 13800 63900 End.Bal 50100 Particulars Eastwood North West Total Profit ratio 3 3 4 10 Ending capital 28000 43200 50100 Net income 77700 Salary 16200 20500 19500 56200 Bonus (Note:1) 3700 0 0 3700 Interest on ending capital balance 2800 4320 5010 12130 (28000*10%) (43200*10%) (50100*10%) Residual income (deficit) 5670 Allocate 1701 1701 2268 -5670 (5670*3/10) (5670*3/10) (5670*4/10) Total 24401 26521 26778 0 Note:1- Computation of Bonus Let's assume Bonus=X, Then X=0.05(77700-X) 20X=77700-X 21X=77700 X=$ 3700 b. Average capital balances Eastwood Date Debit Credit Balance Months Maintained Months* $ balance 01-Jan 31100 31100 4 124400 01-May 6400 37500 4 150000 01-Sep 9500 28000 4 112000 12 386400 Average capital=386400/12=$ 32200 North Date Debit Credit Balance Months Maintained Months* $ balance 01-Jan 41000 41000 2 82000 01-Mar 9400 31600 4 126400 01-Jul 6000 37600 2 75200 01-Sep 5600 43200 4 172800 12 456400 Average capital=456400/12=$ 38033 West Date Debit Credit Balance Months Maintained Months* $ balance 01-Jan 51600 51600 3 154800 01-Apr 8300 59900 2 119800 01-Jun 4000 63900 2 127800 01-Aug 13800 50100 5 250500 12 652900 Average capital=652900/12=$ 54408 Particulars Eastwood North West Total Profit ratio 1 1 1 3 Average capital 32200 38033 54408 Net income 68990 Interest on average capital balance @ 10% 3220 3803 5441 12464 Salary 25000 21800 26300 73100 Bonus (Note:2) 4290 4290 Residual income (deficit) -20864 Allocate Equally -6955 -6954 -6955 20864 Total 21265 22939 24786 0 Note:2- Computation of Bonus Let's assume Bonus=X, Then X=0.10*(68990-21800-X) 10X=47190-X 11X=47190 X=47190/11=$ 4290 c. Particulars Eastwood North West Total Profit ratio 8 7 5 20 Beginning capital 31100 41000 51600 Net income 95160 Bonus (Note:3) 13293 13293 Salary 22100 18300 15400 55800 Interest on beginning capital balance @ 10% 3110 4100 5160 12370 Residual income (deficit) 13697 Allocate at 8:7:5 5479 4794 3424 -13697 Total 30689 27194 37277 0 Note:3- Computation of Bonus Let's assume Bonus=X, Then X=0.20*(95160-15400-X) 5X=79760-X 6X=79760 X=79760/6=$ 13293

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