The partnership agreement for the law firm of Dewi, Cheete
Question and Solution
The partnership agreement for the law firm of Dewi, Cheetem, and Howe states that net income should be allocated in the following manner: 1. Salaries are to be paid as follows: • Dewi, $50,000 per year • Cheetem, $40,000 per year • Howe, $20,000 per year 2. Each partner is to be paid a bonus of 25% of all revenues he or she generated. During 20-1, each partner generated the following revenues: • Dewi, $250,000 • Cheetem, $150,000 • Howe, $100,000 3. Each partner receives 10% interest on the beginning balance of his or her capital account. Beginning balances of the capital accounts are as follows: • Dewi, $200,000 • Cheetem, $100,000 • Howe, $50,000 Net income for the year ended December 31, 20-1, was $240,000. REQUIRED Prepare the lower portion of the income statement showing the allocation of net income to Dewi, Cheetem, and Howe.