Ch_15_exercise_3.docx

Exercise 15-5: On January 1, 2008, Tony and Jon formed T&J Personal Financial Planning with capital investments of $480,000 and $340,000, respectively. The partnership agreement provides that profits are to be allocated as follows: 1.Annual salaries of $42,000 and $66,000 are granted to Tony and Jon, respectively. 2.Jon is entitled to a bonus of 10% of net income after salaries and bonus but before interest on capital investments is subtracted. 3.Each partner is to receive an interest credit of 8% on the original capital investment. 4.Remaining profits are allocated 40% to Tony and 60% to Jon. On December 31, 2008, the partnership reported net income before salaries, interest, and bonus of $188,000.

Exercise 15-5: Calculate the 2008 allocation of partnership bonus.

Bonus Calculation