Partners Lucas and May formed Lucas & May LLP on January 2, 2005. Their capital accounts showed the following changes during:

Lucas, May, Capital Capital Original investments, Jan. 2, 2005 $120,000 $180,000 Investments: May 1 15,000 July 1 15,000 Withdrawals: Nov. 1 (30,000) (75,000)
Capital account balances, Dec. 31, 2005 $105,000 $120,000 The income of Lucas & May LLP for 2005, before partners’ salaries expense, was $69,600. The income included an extraordinary gain of $12,000.
Instructions Prepare a working paper to compute each partner’s share of net income of Lucas & May LLP for 2005 to the nearest dollar, assuring the following alternative income-sharing plans:

a. The partnership contract is silent as to division of net income or loss.

b. Income before extraordinary items is shared equally after allowance of 10% interest on average capital account balances (computed to the nearest month) and after salaries of $20,000 to Lucas and $30,000 to May recognized as operating expenses by the partnership.
Extraordinary items are shared in the ratio of original investments.

c. Income before extraordinary items is shared on the basis of average capital account balances, and extraordinary items are shared on the basis of original investments.

d. Income before extraordinary items is shared equally between Lucas and May after a 20% bonus to May based on income before extraordinary items after the bonus. Extraordinary items are shared on the basis of original investments.