Allocation of interest on capital accounts and profit to partners Assume that there are three...
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Accounting
Allocation of interest on capital accounts and profit to partners
Assume that there are three partners in a partnership, A, B, and C. Partner C provides services to the partnership and is entitled to a salary of $50,000. In addition, assume that the Partnership Agreement provides for an interest allocation of 5% based on the weighted-average Capital Account balance during the year. There is a balance in each Capital Account for Partners A and B of $500,000 for the full year. Partner C, however, was admitted the partnership for an initial capital contribution of $300,000 on March 31. Finally, assume that the Partnership revenues less expenses(other than salary to Partner C and interest on capital balances) are $400,000, and that the Partnership Agreement provides for a sharing ratio of 40%40%20% for Partners A, B, and C, respectively. Prepare a schedule for the allocation of profit to the partners.
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