Partners Johnson, Kane and Lehman agreed to the following provisions for sharing profit or loss from their partnership:1. Johnson, Kane and Lehman receive salaries of $42,000, $35,000, and $50,000,...

Partners Johnson, Kane and Lehman agreed to the following provisions for sharing profit or loss from their partnership: 1. Johnson, Kane and Lehman receive salaries of $42,000, $35,000, and $50,000, respectively. 2. Interest on average capital investment is credited at the rate of 10 percent per annum. 3. Residual profit or loss is shared in the ratio 4:5:1. 4. All provisions are to be fully implemented. The average capital investments for the year are: Johnson………………………………………………………………$186,000 Kane……………………………………………………………………275, 000 Lehman…………………………………………………………………83,000 Required a. Prepare a schedule to allocate partnership income of $217,000. b. Repeat part a for income of $112,000. c. Suppose Johnson, as managing partner, is entitled to a bonus of 15 percent of profit after the bonus but before other allocation provisions. Assume partnership income is $217,000. Without re-doing the entire schedule, calculate the effect of the bonus on the net allocation to Johnson and the other partners. View Solution:

Partners Johnson Kane and Lehman agreed to the following provisions