Chap015_Classproblems_solu

Chap015_Classproblems_solu - Solutions to Chapter 15...

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Solutions to Chapter 15 In‐class Problems 1 E15-2 Division of Income — Multiple Bases a. Distribution of $80,000 income: Angela Dawn Total Profit percentage 70% 30% 100% Average capital $ 50,000 $ 30,000 Net income $ 80,000 Interest on average capital (10%) $ 5,000 $ 3,000 (8,000) Salary 25,000 15,000 (40,000 ) Residual income $ 32,000 Allocate 70%:30% 22,400 9,600 (32,000 ) Total $ 52,400 $ 27,600 $ -0- b. Distribution of $20,000 income: Angela Dawn Total Profit percentage 70% 30% 100% Average capital $ 50,000 $ 30,000 Net income $ 20,000 Interest on average capital (10%) $ 5,000 $ 3,000 (8,000) Salary 25,000 15,000 (40,000 ) Residual income (deficit) $ (28,000) Allocate 70%:30% (19,600 ) (8,400 ) 28,000 Total $ 10,400 $ 9,600 $ -0- Section 401 of the UPA 1997 states that, “Each partner is entitled to an equal share of the partnership profits and is chargeable with a share of the partnership losses in proportion to the partner’s share of the profits.”
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