Horngren’s Accounting, Volume 2, 11th Canadian Edition by Tracie Miller-Nobles Solution manual
Net income allocated to partners$ 58,000$ 50,500$28,000$136,500
(25–30 min.) P12-2A
Req. 1
Sasso, Schwimmer, and Perry
Allocation of Profits and Losses
SassoSchwimmerPerryTotal
c. Total net income (loss) $(136,500)
Allocation to the partners:
Sharing of first $45,000 profit based on capital investments:
Sasso ($60,000/$360,000 ´ $45,000)$ 7,500
Schwimmer ($120,000/ $360,000 ´ $45,000) $ 15,000
Perry ($180,000/$360,000 ´ $45,000) $ 22,500
Total (45,000)
Net income left for allocation (181,500)
Sharing of next $75,000 of profit based on service:
Sasso45,000
Schwimmer 30,000
Total (75,000)
Net income left for allocation (256,500)
Remainder shared equally:
Sasso ($256,500 ´ 1/3)(85,500)
Schwimmer ($256,500 ´ 1/3) (85,500)
Perry ($256,500 ´ 1/3) (85,500)
Total 256,500
Net income left for allocation 0
Net income allocated to partners$(33,000)$(40,500)$(63,000)$(136,500)
(continued) P12-2A
Req. 2
SASSO, SCHWIMMER, AND PERRY
Income Statement
For the Year Ended September 30, 2020
Sales revenue$ 858,000
Expenses 721,500
Net income$ 136,500
Allocation of earnings
Sheila Sasso$ 58,000
Karen Schwimmer50,500
Jim Perry 28,000
Total$ 136,500
Req. 3
This problem will help students learn to allocate partnership profits and losses to the partners. This allocation is important because one of the main points of contention among partners is the sharing of profits and losses. Learning this material should help partners design an agreement that is understandable. In turn, that may help the partners avoid disagreements.
(25–35 min.) P12-3A