Exercise 3-6 (Division of Profit: Interest on Capital, Salary Allowance Bonus in Managing Partner)

Belen and Basco formed a partnership on January 2, 2014 and agreed to share profit 90% and 10% respectively. Belen invested cash of 200,000. Basco invested no assets for has a specialized expertise and manages the firm full time. There were no withdrawals during the year. The partnership contract provides for the following:

1. Capital accounts are to be credited annually with interest at 10% of beginning capital.
2. Basco is to be paid a salary 8,000 a month.
3. Basco is to receive a bonus of 25% of profit calculated before deduction of salary and interest on capital accounts.
4. Bonus, interest, and Basco's salary are to be considered as expenses.

The fiscal year 2014 income statement for the partnership includes the following:

Revenue 701,600

Expenses(including salary, interest and bonus) 379,600

Profit 322,000

Instructions: Determine the amount of bonus to be credited to Basco.