Carraway and Boos have a partnership agreement which includes the following provisions regarding sharing net income or net loss:
1.A salary allowance of $48,000 to Carraway and $36,000 to Boos.
2.An interest allowance of 10% on capital balances at the beginning of the year.
3.The remainder to be divided 60% to Carraway and 40% to Boos.
The capital balance on January 1, 2017, for Carraway and Boos was $90,000 and $120,000, respectively. During 2017, the Carraway and Boos Partnership had sales of $495,000, cost of goods sold of $290,000, and operating expenses of $85,000.
Prepare an income statement for the Carraway and Boos Partnership for the year ended December 31, 2017. As a part of the income statement, include a Division of Net Income to each of the partners.
Barr & Eglin Co. reports net income of $42,000. The partnership agreement provides for annual salaries of $24,000 for Barr and $18,000 for Eglin and interest allowances of $4,000 to Barr and $6,000 to Eglin. Any remaining income or loss is to be shared 70% by Barr and 30% by Eglin.
Compute the amount of net income distributed to each partner.