Carraway and Boos have a partnership agreement which includes the following provisions regarding sharing net income or net loss:

1. A salary allowance of $48,000 to Carraway and $36,000 to Boos.

2. An interest allowance of 10% on capital balances at the beginning of the year.

3. The remainder to be divided 60% to Carraway and 40% to Boos.

The capital balance on January 1, 2014, for Carraway and Boos was $90,000 and $120,000, respectively. During 2014, the Carraway and Boos Partnership had sales of $495,000, cost of goods sold of $290,000, and operating expenses of $85,000.

Instructions

Prepare an income statement for the Carraway and Boos Partnership for the year ended December 31, 2014. As a part of the income statement, include a Division of Net Income to each of the partners. (13 marks)