Exercise 12-4 (Part Level Submission)

McGill and Smyth have capital balances on January 1 of $44,000and $47,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $15,000for McGill and $12,000for Smyth, (2) interest at10% on beginning capital balances, and (3) remaining income or loss to be shared70% by McGill and30% by Smyth.

(1)Prepare a schedule showing the distribution of net income, assuming net income is $65,000.

DIVISION OF NET INCOME

McGill

Smyth

Total

Salary allowance$

$

$

Interest allowance

Total salaries and interest

Remaining income / deficiency

Total division of net income$

$

$

(2)Prepare a schedule showing the distribution of net income, assuming net income is $22,000.

DIVISION OF NET INCOME

McGill

Smyth

Total

Salary allowance

$

$

$

Interest allowance

Total salaries and interest

Remaining income / deficiency

Total division of net income

$

$

$