On January 1, 2016, Bog, Cog, and Fog had capital balances of $60,000, $100,000, and $20,000 respectively in their partnership. In 2016 the partnership reported net income of $40,000. None of the partners withdrew any assets in 2016. The partnership agreed to share profits and losses as follows:
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a. |
A monthly salary allowance of $2,000, $2,500, and $4,000 to Bog, Cog and Fog respectively. |
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b. |
An annual interest allowance of 10 per cent to each partner based on her capital balance at the beginning of the year. |
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c. |
Any remaining balance to be shared in a 5:3:2 ratio (Bog:Cog:Fog). |
Required:
- Prepare a schedule to allocate the 2016 net income to partners.
- Assume all the income statement accounts for 2016 have been closed to the income summary account. Prepare the entry to record the division of the 2016 net income.
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