Question

Partnership income allocation—Bonus Arn, Bev, and Car are partners who share profits and losses 30:30:40, respectively, after Bev, who manages the partner- ship, receives a bonus of 10 percent of income, net of the bonus. Partnership income for the year is $198,000

Required: Prepare a schedule to allocate partnership income to Arn, Bev, and Car.

Answer 1

Solution:

Let Bonus to Bev = X

Now, X = 10% of (Income -Bonus)

X = 10% * ($198000 - X)

X = $19800 - .10X

1.10X = $19800

X = $19800 / 1.10 = 18000

Remaining Income after Bonus is to be divided in the ration of 30:30:40

Remaining Income = $198000 - Bonus = $198000 - $18000 = $180000

Schedule to allocate Partnership Income
Particulars	Arn	Bev	Car	Total
Bonus to Bev	$0.00	$18,000.00	$0.00	$18,000.00
Remaining Income (30:30:40)	$54,000.00	$54,000.00	$72,000.00	$180,000.00
Total	$54,000.00	$72,000.00	$72,000.00	$198,000.00