EXERCISE 13-3
(1) Allocation of $220,000 of Partnership Income
Cumulative
Johnson Larson Kragen Total
Profit and loss percentage 1/3 1/3 1/3
Salary $50,000 $60,000 $ — $110,000
Bonus (see Note A) — — 20,000 130,000
Interest on capital 4,000 2,500 14,500 151,000
Balance 23,000 23,000 23,000 220,000
Total $77,000 $85,500 $57,500
Exercise 13-3, Concluded
(2) Allocation of $34,000 of Partnership Loss
Cumulative
Johnson Larson Kragen Total__
Profit and loss percentage 1/3 1/3 1/3
Salary $ 50,000 $ 60,000 $ — $110,000
Bonus (see Note A) — — — 110,000
Interest on capital 4,000 2,500 14,500 131,000
Balance (55,000) (55,000) (55,000) (34,000)
Total $ (1,000) $ 7,500 $(40,500)
(3) Allocation of $132,000 of Partnership Income
Cumulative
Johnson Larson Kragen Total
Profit and loss percentage 1/3 1/3 1/3
Salary $50,000 $60,000 $ — $110,000
Bonus (see Note A) — — 12,000 122,000
Interest on capital (see Note B) 1,905 1,190 6,905 132,000
Balance — — — 132,000
Total $51,905 $61,190 $18,905
Note A: Calculation of Annual Bonus
Bonus when Income Is $220,000
Bonus = 10% (Net Income – Bonus)
110% Bonus = 10% ($220,000)
110% Bonus = $22,000
Bonus = $20,000
Bonus when Loss Is $34,000…