Illustration: On January 1, 2021, Nabiha and Abdullah formed SARA Accounting Consultancy Partnership with capital investments of 71,000 and 41,000, respectively. The partnership agreement provides that profits are to be allocated as follows: Annual salaries of 20,000 and 15,000 are granted to Nabiha and Abdullah, respectively. Abdullah is entitled to a bonus of 10% of net income after salaries and bonus but before interest on capital investments is subtracted. Each partner is to receive an interest credit of 5% on the original capital investment. Remaining profits are allocated 60% to Nabiha and 40% to Abdullah. On December 31, 2021, the partnership reported net income before salaries, interest, and bonus of 150,000. Illustration: Calculate the 2021 allocation of partnership bonus.

Calculate the 2021 allocation of partnership profit of 150,000.

Insufficient Income to Cover Allocation Amount by which salary and/or interest exceeds net income is allocated to individual partners in their agreed ratio for allocating residual income. For example, assume that Nabiha and Abdullah agree to divide profits as follows: Salary: Nabiha, 85,000; Abdullah, 55,000 Interest: 125% on average capital balances - Nabiha, 7,100; Abdullah, 4,100 Remainder: To be divided equally

PPT-11 Illustration: B. Prepare a statement of changes in partners capital for the year ended December 31, 2021.

Bonus 10% X (Income After Salaries - Bonus) - Bonus = = Bonus II 1.1 Bonus Bonus II o A Proof: Nabiha Abdullah Total Nabiha Abdullah Total oro Statement of Changes in Partner's Capital for the Year Ended December 31, 2021 Nabiha Abdullah