Reference no: EM132789644

Evans, Fitch, and Gault operate a partnership with a complex profit and loss sharing agreement. The average capital balance for each partner on December 31, 2021 is $300,000 for Evans, $250,000 for Fitch, and $325,000 for Gault. An 8% interest allocation is provided to each partner. Evans and Fitch receive salary allocations of $10,000 and $15,000, respectively. If partnership net income is above $25,000, after the salary allocations are considered (but before the interest allocations are considered), Gault will receive a bonus of 10% of the original amount of net income. All residual income is allocated in the ratios of 2:3:5 to Evans, Fitch, and Gault, respectively.

Problem a. Prepare an schedule to allocate income to the partners assuming that partnership net income is $250,000.

Problem b. Prepare an journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).