Reference no: EM132480071

Question - Partnership income allocation-Profit-sharing based on beginning, ending, and average capital balances

A summary of changes in the capital accounts of the Kat, Lyn, and Mol partnership for 2016, before closing partnership net income to the capital accounts, is as follows:

	Kat Capital	Lyn Capital	Mol Capital	Total Capital
Balance January 1, 2016	$80,000	$80,000	$90,000	$250,000
Investment April 1	20,000			20,000
Withdrawal May 1		(15,000)		(15,000)
Withdrawal July 1	(10,000)			(10,000)
Withdrawal September 1			(30,000)	(30,000)
	$90,000	$65,000	$60,000	$215,000

REQUIRED: Determine the allocation of the 2016 net income to the partners under each of the following sets of independent assumptions:

1. Partnership net income is $60,000, and profit is divided on the basis of average capital balances during the year.

2. Partnership net income is $50,000, Kat gets a bonus of 10 percent of income for managing the business, and the remaining profits are divided on the basis of beginning capital balances.

3. Partnership net loss is $35,000, Mol receives a $12,000 salary, each partner is allowed 10 percent interest on beginning capital balances, and the remaining profits are divided equally.