Problem 4

The partnership agreement of L, M, N and O was formed on January 2, 2020. The original cash investments were as follows:

L, Capital $ 64,000

M, Capital 116,000

N. Capital 150,000

O, Capital 200,000

According to the partnership contract, the partners were to be remunerated as follows:

1. Fixed Amounts of $20,000 for M and $15,000 for O.

2. Interest at 8% on the average capital account balances during the year.

3. Remainder divided as follows

L - 20%

M 15%

N 40%

O 25%

The partnership incurred a loss of $35,000 during 2020.

During 2020 L invested an additional $25,000 in capital on August 1, 2020. M made two capital withdrawals of $10,000 each on April 1, 2020 and September 1, 2020 and O made a capital contribution of $30,000 on May 1, 2020.

REQUIRED: Prepare a schedule showing the allocation of the partnership income to each partner for 2020