Division of Income
C. Eastwood, A. North, and M. West are manufacturers’ representatives in the architecture busi- ness. Their capital accounts in the ENW partnership for 20X1 were as follows:
C. Eastwood, Capital
A. North, Capital
M. W est, Capital
| 9/1 XXXXXXXXXX8,000 | 1/1 | 30,000 | | 3/1 XXXXXXXXXX9,000 | 1/1 | 40,000 | | 8/1 | 12,000 | 1/1 | 50,000 |
| | 5/1 | 6,000 | | | 7/1 | 5,000 | | | | 4/1 | 7,000 |
| | | | | | 9/1 | 4,000 | | | | 6/1 | 3,000 |
Required
For each of the following independent income-sharing agreements, prepare an income distribution schedule.
a. Salaries are $15,000 to Eastwood, $20,000 to North, and $18,000 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 $78,960.
b . Interest is 10 percent of weighted-average capital balances. Salaries are $24,000 to Eastwood,
$21,000 to North, and $25,000 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 $68,080.
c. West receives a bonus of 20 percent of net income after deducting the bonus and the salaries.
Salaries are $21,000 to Eastwood, $18,000 to North, and $15,000 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 $92,940.