Larry Collins, Elinor Davis, and Paul Chiu have formed a partnership. Collins invested \(\$ 15,000\), Davis \(\$ 18,000\), and Chiu \(\$ 27,000\). Collins will manage the store, Davis will work in the store half-time, and Chiu will not work in the business.

\section*{Required}

1. Compute the partners' shares of profits and losses under each of the following plans.

a. Net loss is \(\$ 42,900\), and the articles of partnership do not specify how profits and losses are shared.

b. Net loss is \(\$ 60,000\), and the partnership agreement allocates 40 percent of profits to Collins, 25 percent to Davis, and 35 percent to Chiu. The agreement does not discuss the sharing of losses.

c. Net income is \(\$ 92,000\). The first \(\$ 40,000\) is allocated on the basis of salaries, with Collins receiving \(\$ 28,000\) and Davis receiving \(\$ 12,000\). The remainder is allocated on the basis of partner capital contributions.

d. Net income for the year ended January \(31,19 \mathrm{X} 8\), is \(\$ 180,000\). The first \(\$ 75,000\) is allocated on the basis of partner capital contributions, and the next \(\$ 36,000\) is based on service, with Collins receiving \(\$ 28,000\) and Davis receiving \(\$ 8,000\). Any remainder is shared equally.
2. Revenues for the year ended January \(31,19 X 8\), were \(\$ 870,000\), and expenses were \(\$ 690,000\). Under plan (d), prepare the partnership income statement for the year.
3. How will what you learned in this problem help you manage a partnership?