APPLE$-$JACK PARTNERSHIP

Income Statement

For the Year Ended December $31,20$X$5$

Net Sales $ $317,000$

Cost of Goods Sold $(194,000)$

Gross Margin $ $123,000$

Operating Expenses $(32,000)$

Net Income $ $91,000$

Additional Information for $20$X$5$

Apple began the year with a capital balance of $$44,100.$

Jack began the year with a capital balance of $$117,000.$

On April $1,$ Apple invested an additional $$19,800$ into the partnership.

On August $1,$ Jack invested an additional $$21,000$ into the partnership.

Throughout $20$X$5,$ each partner withdrew $$400$ per week in anticipation of partnership net income. The partners agreed that these withdrawals are not to be included in the computation of average capital balances for purposes of income distributions.

Apple and Jack have agreed to distribute partnership net income according to the following plan:

Apple Jack

$1.$ Interest on average capital balances $6\%6\%$

$2.$ Bonus on net income before the bonus but after interest on average capital balances $10\%$

$3.$ Salaries $ $17,000$ $ $19,000$

$4.$ Residual $($if positive$)70\%30\%$

Residual $($if negative$)50\%50\%$

Required:

Prepare a schedule that discloses the distribution of partnership net income for $20$X$5.$

Prepare the statement of partners$$ capital at December $31,20$X$5.$

How would your answer to part a change if all of the provisions of the income distribution plan were the same except that the salaries were $$33,000$ to Apple and $$41,316$ to Jack?