High and School are partners in High School Learning Co. each contributing $75,000 towards their capital. Their fiscal year is January December. On December 31, 2018 the business reported the following:

a. Sales turnover of $1,800,000

b. Cost of goods sold $600,000

c. Operating Expenses $400,000

d. High is the General Partner and School the Limited Partner. High and School are to be paid a salary of $15,000 and $12,000 salary per month respectively.

e. Both the partners are to receive interest on beginning capital @8% per annum.

f. School is to receive a bonus of $20,000 if sales exceeded $1,000,000 in any year and High is to be paid a commission of 2% on all sales.

There was no agreement regarding the sharing of profits between partners. The provisions of the Partnership Act was to be applied in this case.

REQUIRED:

A Prepare a statement to show the distribution of income between the partners.

B Determine the capital account balances of the partners on March 31, 2018.