Homework 2 - E12-4 E12-12 E12-4 1 Net Income $50,000...

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E12-4, E12-12 E12-4 1) Net Income $50,000 Distribution of Net Income McGill Smyth Total Salary Allowance $22,000 $13,000 $35,000 Interest Allowance on partners’ capital McGill ($50,000 x 10%) 5,000 Smyth ($40,000 x 10%) 4,000 Total Interest Allowance 9,000 Total Salaries and Interest 27,000 17,000 44,000 Remaining income, $6,000 ($50,000 - $44,000) McGill ($6,000 x 60%) 3,600 Smyth ($6,000 x 40%) 2,400 Total Remainder 6,000 Total Division of Net Income $30,600 $19,400 $50,000 Allocation of Net Income Jan 1 Income Summary 50,000 McGill, Capital 30,600 Smyth, Capital 19,400 (To close net income to partners’ capital) 2) Net Income $36,000 Distribution of Net Income McGill Smyth Total Salary Allowance $22,000 $13,000 $35,000 Interest Allowance on partners’ capital McGill ($50,000 x 10%) 5,000 Smyth ($40,000 x 10%) 4,000 Total Interest Allowance 9,000 Total Salaries and Interest 27,000 17,000 44,000 Remaining deficiency, ($8,000) ($36,000 - $44,000) McGill ($8,000 x 60%) (4,800) Smyth ($8,000 x 40%) (3,200) Total Remainder (8,000) Total Division of Net Income $22,200 $13,800 $36,000 Allocation of Net Income Jan 1 Income Summary 36,000 McGill, Capital 22,200
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Smyth, Capital 13,800 (To close net income to partners’ capital) E12-12
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