Home Sweet Home Furnishings, Inc. has three partners Bonner, Cohen, and Lewis. A

Question

Home Sweet Home Furnishings, Inc. has three partners Bonner, Cohen, and Lewis. At the beginning of the current year 2015, their capital balances were:

Bonner - $180,000

Cohen- $140,000

Lewis - $80,000

The partnership agreement provides that partners shall receive salary allowances as follows:

Bonner - $10,000

Cohen- $50,000

Lewis - $28,000

The partners shall also be allowed 12 percent interest annually on their capital balances. Residual profit or loss is to be divided as follows:

Bonner – 1/2

Cohen– 1/3

Lewis – 1/6

REQUIRED:

Prepare separate schedules showing how income will be divided among the three partners in each of the following cases. The figure given in each case is the annual net income or loss to be allocated among the partners. Round calculations to the nearest whole dollar and show all supporting schedules.

Income of $526,000

Income of $95,000

Loss of $32,000

A. Income of $526,000

Lewis

b. Income of $95,000

c. Loss of $32,000

Division of Net Income Total Net Income Bonner Cohen Lewis Net Income to be divided: Salary allowances to partners Income after salary allowance Interest allowances on capital: show calculation Bonner Cohen Lewis         Total allocated as interest Remaining income after salary and interest allowances Allocated by ratio: Show calculation Bonner Cohen

Lewis

Total Share to each partner

Explanation / Answer

Home Sweet Home Furnishings, Inc. has three partners Bonner, Cohen, and Lewis. A

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