Question - Adam, Bella, and Chris operate a partnership with a complex profit and loss sharing agreement. The average capital balance for Adam, Bella and Chris on December 31, 2014 is $120,000, $270,000, and $340,000, respectively. A 6% interest allocation is provided to each partner based on the average capital balance on December 31, 2014. Adam and Bella receive salary allocations of $40,000 and $50,000, respectively. If partnership net income is above $160,000 after the salary allocations are considered (but before the interest allocations are considered), Chris will receive a bonus of 10% of the income (pre-salary and interest, but net of the bonus). All residual income is allocated in the ratios of 2:2:6 to Adam, Bella, and Chris, respectively.
Part 1: Prepare a schedule to allocate income to the partners, assuming that the partnership net income for 2014 is $330,000.
Part 2: Prepare a journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).