Nicholas and Rudy agree to form a partnership on January 1, 2019. Nicholas has operated a business a sole proprietorship for a number of years and will contribute the net assets of his business to the partnership. The appraised value of the net assets in Nicholas's business are given below. Cash S 6,000 Receivables 12,000 Inventory 25,000 Property, plant & equipment 75,000 Accounts payable (10,000) Accrued liabilities (23,000 Mortgage payable (35,000 Net Assets S 50,000 Rudy has significant experience in marketing and will contribute cash in the amount of S 45,000 Nicholas and Rudy agree to begin operations with capital balances equal to their initial investments. The partnership agreement indicates that the bonus method will be used to account for any subsequent changes in partner ownership The Articles of Partnership (the partnership agreement) provide that income and losses are to be allocated in the following manner: * Nicholas is to receive a salary of 36,000 * Rudy is to receive a salary of 52,000 * Interest is calculated on the beginning capital balances at a rate of 10% Nicholas is to receive a bonus based on net income after subtracting the bonus, salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed. The * bonus as a percentage is 10% *The remaining gain or loss is to be allocated to Nicholas and Rudy in the ratio 2:4 Each partner is provided a monthly draw of S 1,200 Income for 2019 amounted to S 275,000 On January 2, 2020, Wish joined the partnership by paying Nicholas and Rudy directly. For this payment, Wish received a partnership interest of 30% The total amount that Wish paid to Nicholas and Rudy was S 225,000 The partnership agreement was revised to allow Wish * a salary of S 30.000 * Nicholas's and Rudy's salaries remain unchanged * Interest is allowed on all partner's beginning capital balances at the previous rate. * Nicholas continues to receive the bonus as stated in the initial agreement. *The remaining gain or loss is to be to Nicholas, Rudy, and Wish in the ratio of 2:42 Each partner is provided a monthly draw of 1,200 Income for 2020 amounted to S 310,000 On January 1, 2021, Nicholas decided to retire and is paid an amount equal to his capital balance plus a stated percentage of 30% After Nicholas's retirement, Rudy and Wish continue to receive their previously established salaries and interest. Remaining profits and losses are allocated to Ruday and Wish in the ratio of 4:2 Income for 2021 amounted to S 330,000 Required: 1. For each of the years 2019-2021, prepare a Statement of Partnership Capital b. Schedule of Income Allocation
