Pac-link Technologies is a partnership owned and operated by Tom Kennedy and Mike McConnell. To recognize the fact that the partners have invested significantly different amounts of capital and that Tom works full time, while Mike works only part time, the partnership agreement states that the profit will be allocated as follows: An interest allowance of 3% of each partner's beginning capital balance plus a salary allowance of $ 85 per hour worked. Any remaining profit or loss after calculation of these allowances will be allocated equally. At January 1, 2021, Tom's capital account balance was $ 15,000 and Mike's was $ 20,000. During the year ended December 31, 2021, Tom worked 1,200 hours and Mike worked 550 hours.

Instructions

a) Calculate each partner's share of profit assuming that profit for the year ended December 31, 2021 is $ 196,000.

b) Calculate each partner's share of profit assuming that profit for the year ended December 31, 2021 is $ 88,000.

Joanne and Diane have a partnership in The Luxury Flooring Company. The partnership agreement includes the following provisions regarding sharing profit or loss: 1. A salary allowance of $ 90,000 to Joanne and $ 65,000 to Diane. 2. An interest allowance of 7% on capital balances at the beginning of the year. 3. The remainder to be divided 60% to Joanne and 40% to Diane. The capital balances on January 1, 2021, for Joanne and Diane were $ 480,000 and $ 1,000,000, respectively. During 2021, The Luxury Flooring Company had sales of $ 1,200,000, cost of goods sold of $ 417,000, and operating expenses of $ 335,000.

Instructions Prepare an income statement for The Luxury Flooring Company for the year ended December 31, 2021. As a part of the income statement, include a division of profit to each of the partners.