EX 12-5 Dividing partnership net loss

Megan West and Jon Sokolov formed a partnership in which the partnership agreement provided for salary allowances of $45,000 and $35,000, respectively. Determine the division of a $40,000 net loss for the current year, assuming remaining income or losses are shared equally by the two partners.


Answer:

Megan Jon
West Sokolov Total
Salary allowances ...................................... $ 45,000 $ 35,000 $ 80,000
Remainder (net loss, $40,000 plus $80,000
salary allowances) divided equally....... (60,000) (60,000) (120,000)
Net loss....................................................... $ (15,000) $(25,000) $ (40,000)