1. Alder and Bell formed a partnership on January 2, 2014. Bell invested $240,000 in cash. Alder invested land valued at $60,000, which he had purchased for $40,000 in 2001. In addition, Alder possessed superior managerial skills and agreed to manage the firm. The partners agreed to the following profit and loss allocation formula:
a. Interest -8% on original capital investments.
b. Salary - $10,000 a month to Alder.
c. Bonus - Alder is to be allocated a bonus of 20% of net income after subtracting the bonus, interest, and salary.
d. Remaining profit is to be divided equally.
At the end of 2014 the partnership reported net income before interest, salaries, and bonus of $336,000.
Required:
Show the Profit allocation for both Alder and Bell and work out the capital at the end for both the partners
2. A, B, and C formed a partnership and agreed to share profits in a 4:3:2 ratio after recognition of 5% interest on average capital balances and monthly salary allowances of $2,700 to B and $3,000 to C. Average capital balances were as follows:
A 300,000
B 240,000
C 180,000
Required:
Compute the net income (loss) allocated to each partner assuming the partnership incurred a $36,000 net loss and work out the capital at the end for all the partners