The DEF partnership reported net income of $130,000 for the year ended December 31, 20X8. According to the partnership agreement, partnership profits and losses are to be distributed as follows in the following order: D                         E                    F
Salaries                             $25,000              $20,000          $15,000
Bonus on net income         10%                                          
Remainder                       60%                       30%                10%

Required:
How should partnership net income for 2008 be allocated to D, E, and F?

The DEF Partnership

Allocation of Partnership Net Income for 2008:

                                        D             E              F                Total

Net income                                                                    $130,000

Salaries                      $25,000  $20,000  $15,000      (60,000)

Bonus on net income  13,000                            (13,000)

Remainder                  34,200       17,100      5,700       (57,000)

Total allocation        $72,200    $37,100  $20,700    $130,000

Explanation:

a) Data and Calculations:

Net income for the year ended December 31, 2008 = $130,000

Order of distribution of partnership profits and losses:

                                        D             E              F

Salaries                   $25,000  $20,000  $15,000

Bonus on net income  10%                    

Remainder                  60%         30%           10%

Bonus on net income = $13,000 ($130,000 * 10%)

Remainder after salaries and bonus = $57,000 ($130,000 - $73,000)

D = $34,200 ($57,000 * 60%)

E = $17,100 ($57,000 * 30%)

F = $5,700  ($57,000 * 10%)

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