Response to the following problem:
Charles Lake, Liz Wood, and Hal Parks have formed a partnership. Lake invested $15,000, Wood $18,000, and Parks $27,000. Lake will manage the store; Wood will work in the store half-time; and Parks will not work in the business.
Required:
1. Compute the partners' shares of profits and losses under each of the following plans: a. Net loss is $60,000, and the partnership agreement allocates 40% of profits to Lake, 25% to Wood, and 35% to Parks. The agreement does not specify the sharing of losses.
b. Net income for the year ended January 31, 20X4, is $210,000. The first $75,000 is allocated on the basis of partner capital contributions, and the next $36,000 is based on service, with Lake receiving $28,000 and Wood receiving $8,000. Any remainder is shared equally.
2. Revenues for the year ended January 31, 20X4, were $540,000, and expenses were $330,000. Under plan (b), prepare the partnership income statement for the year.