Chief, Chef, and Sous established a partnership. The partnership rules state that income will be distributed by:
1) Sous receives $10,000 salary
(2) each partner receives 5% interest on average capital balances
(3) remaining income is distributed 3:2:1 (Chief, Chef, Sous)
(4) The amount draw exceeding income for any partner must be contributed back to the partnership
The year begins with capital as follows: Chief = $50,000, Chef = $40,000, Sous = $20,000. During the year, Chief had draw of $10,000 taken January 1, Chef took draw of $8,000 on May 1 and another $8,000 on September 1, and Sous took $6,000 draw on July 1.
There are two independent situations. In situation #1, the partnership earns $104,600. In situation #2, the partnership earns $24,800. For each of these, what would be the amount of income distributed to each partner? What would be the ending capital balance for each partner? Don't use $ signs, but do add commas! For negatives, use -
In situation #1, income to Chief is [a], Chef gets [b] and Sous gets [c]. The end of year capital balances are Chief [d], Chef [e] and Sous [f]
In situation #2, income to Chief is [g], Chef gets [h] and Sous gets [i]. The end of year capital balances are Chief [j], Chef [k] and Sous [l]
