Question

4) The Dallas, Phoenix, and Tulsa reported income of $140,000 from their partnership for the year ended December 31, 2019. Profits and losses are to be distributed as follows:

Dallas Phoenix Tulsa Salaries $35,000 $25,000 $20,000 Bonus 15% -- -- Profit and Loss sharing 60% 30% 10%

How should partnership net income for 2019 be allocated to Dallas, Phoenix, and Tulsa?

Dallas, Phoenix, Tulsa A) $79,000 $36,700 $24,300 B) $79,400 $36,700 $23,900 C) $55,200 $57,000 $27,800 D) $45,200 $40,000 $44,800

Answer 1

	Dallas	Phoenix	Tulsa	Total
Salary allowance	35,000	25,000	20,000	80,000
Bonus allowance	21,000	0	0	21,000
Total	56,000	25,000	20,000	101,000
Remaining income	23,400	11,700	3,900	39,000
Total income distribution	79,400	36,700	23,900	140,000

Remaining income of $39,000 will be divided among the partners in their income ratio of 60%/30%/10%.

Dallas share of profit = 39,000 x 60%

= $23,400

Phoenix share of profit = 39,000 x 30%

= $11,700

Tulsa share of profit = 39,000 x 10%

= $3,900

Correct option is (B)

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