Exercise D-5 Income allocation in a partnership LO P2 Kramer and Knox began a pa

Question

Exercise D-5 Income allocation in a partnership LO P2 Kramer and Knox began a partnership by investing $67,000 and $52,000, respectively. The partners agreed to share net income and loss by granting annual salary allowances of $58,500 to Kramer and $48,500 to Knox, 10% interest allowances on their investments, and any remaining balance shared equally. 1. Determine the partners shares of Kramer and Knox given a first-year net income of $91,800. (Enter all allowances as positive values. Enter losses as negative values.) Allocation of partnership income Kramer Knox S 91,800 Net Income (loss) Salary allowances Balance of income (loss) Interest allowances Balance of income (loss) Balance allocated equally Balance of income (loss) Shares of the partners 2. Determine the partners shares of Kramer and Knox given a first-year net loss of $11,100. (Enter all allowances as positive values. Enter losses as negative values.) Allocation of partnership income Net Income (loss) Salary allowances Balance of income (loss) nterest allowances Balance of income (loss) Balance allocated equally Balance of income (loss) Shares of the partners S (11.100)

Explanation / Answer

Req A: ALLOCATION OF PARTNERSHIP INCOME KRAMER KNOX TOTAL Net income 91,800 Salary Allowance 58500 48500 107000 balance of Income (Loss) 15,200 Interest allowance 6700 5200 11900 Balance of income (Loss) 27100 Balance allocated equally -13550 -13550 -27100 Balance of Loss 0 Share of Partners 51,650 40150 91800 Req B: ALLOCATION OF PARTNERSHIP INCOME KRAMER KNOX TOTAL Net Loss -11,100 Salary Allowance 58500 48500 107000 balance of Income (Loss) 118,100 Interest allowance 6700 5200 11900 Balance of income (Loss) 130,000 Balance allocated equally -65000 -65000 -130000 Balance of Loss 0 Share of Partners 200 -11300 -11100

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