The partnership agreement of Sleeter, Frisco, and Kinney provides for annual distribution of profit and loss in the following sequence:

Frisco, the managing partner, receives a bonus of 10% of net income.

Each partner receives 5% interest on average capital investment.

Residual profit or loss is to be divided 4:2:4.

Average capital investments for 2017 were:

Sleeter $270,000

Frisco $180,000

Kinney $120,000

Required:

A. Prepare a schedule to allocate net income, assuming operations for the year resulted in:

1.Net income of $75,000.

2. Net income of $15,000.

3. Net loss of $30,000.

B. Prepare the journal entry to close the Income Summary account for each situation above.

2.(35) Rodgers and Michael formed a partnership on January 2, 2017. Michael invested $120,000 in cash. Rodgers invested land valued at $30,000, which he had purchased for $20,000 in 2005. In addition, Rodgers possessed superior managerial skills and agreed to manage the firm. The partners agreed to the following profit and loss allocation formula:

a. Interest 8% on original capital investments.

b. Salary $5,000 a month to Rodgers.

c. Bonus Rodgers is to be allocated a bonus of 20% of net income after subtracting the bonus, interest, and salary.

d. Remaining profit is to be divided equally.

At the end of 2017 the partnership reported net income before interest, salaries, and bonus of $168,000.

Required:

Calculate the amount of bonus to be allocated to Rodgers.

3.(34) Dante, Milton, and Cervantes formed a partnership and agreed to share profits in a 3:1:2 ratio after recognition of 5% interest on average capital balances andmonthlysalary allowances of $3,750 to Milton and $3,000 to Cervantes. Average capital balances were as follows:

Dante 300,000

Milton 240,000

Cervantes 180,000

Required:

Compute the net income (loss) allocated to each partner assuming the partnership incurred a $27,000 net loss.

4.(32) Portney, Grey, and Ross are partners with capital balances of $80,000, $200,000, and $120,000, respectively. Profits and losses are shared in a 3:2:1 ratio. Grey decided to withdraw and the partnership revalued its assets. The value of inventory was decreased by $20,000 and the value of land was increased by $50,000. Portney and Ross then agreed to pay Grey $230,000 for his withdrawal from the partnership.

Required:

Prepare the journal entry to record Greys withdrawal under the

A. bonus method.

B. full goodwill method.