Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 38

This activity requires teamwork to reinforce understanding of accounting for partnerships.
Required
1. Assume that Baker, Warner, and Rice form the BWR Partnership by making capital contributions of $200,000, $300,000, and $500,000, respectively. BWR predicts annual partnership net income of $450,000. The partners are considering various plans for sharing income and loss. Assign a different team member to compute how the projected $450,000 income would be shared under each of the following separate plans:
a. Shared equally.
b. In the ratio of the partners' initial capital investments.
c. Salary allowances of $50,000 to Baker, $60,000 to Warner, and $70,000 to Rice, with the remaining balance shared equally.
d. Interest allowances of 10% on the partners' initial capital investments, with the remaining balance shared equally.
2. In sequence, each member is to present his or her income-sharing calculations with the team.
3. As a team, identify and discuss at least one other possible way that income could be shared.