McGill and Smyth have capital balances on January 1 0f $50,000 and $40,000, respectively. The partnership income-sharing agreement provides for
(1) annual salaries of $22,000 for McGill and $13,000 for Smyth,
(2) interest at 10% on beginning capital balances, and
(3) remaining income or loss to be shared 60% by McGill and 40% by Smyth.
Instructions
Prepare a schedule showing the distribution of net income, assuming net income is (1) $50,000 and (2) $36,000.
Journalize the allocation of net income in each of the situations above.