Reference no: EM132858807

Question - R&B Inc., has three partners: Richard, Bollin and Bixxy. At the beginning of the current year their capital balances were: Richard, $180,000; Bollin, $140,000; and Bixxy, $80,000.

The partnership agreement provides that partners shall receive salary allowances as follows:

Partner 1, $10,000; Partner 2, $50,000; and Partner 3, $28,000. The partners shall also be allowed 12 percent interest annually on their capital balances. Residual profit or loss is to be divided: Richard, one-half; Bollin, one-third; and Bixxy, one-sixth. (10)

Required - Prepare separate schedules showing how income will be divided among the three partners in each of the following cases. The figure given in each case is the annual partnership net income or loss to be allocated among the partners. Round calculations to the nearest dollar.

a. Income of $526,000.

b. Loss of $32,000.