Dante, Milton, and Cervantes formed a partnership and agreed to share profits in a 3:1:2 ratio after recognition of 5% interest on average capital balances and monthly salary allowances of $3,750 to Milton and $3,000 to Cervantes. Average capital balances were as follows:

Dante 300,000

Milton 240,000

Cervantes 180,000

Required:

Compute the net income (loss) allocated to each partner assuming the partnership incurred a $27,000 net loss.

Dante ($57,000)

Milton $33,000

Cervantes ($3,000)

Explanation:

Salary - -

Interest $15,000

Residual $ (72,000)

Total $ (57,000)

Milton

Salary $45,000

Interest $12,000

Residual $ (23,000)

Total $ (33,000)

Carventes

Salary $36,000

Interest $9,000

Residual $ (48,000)

Total $ (3,000)

Total

Salary ($45,000+$36,000) $81,000

Interest ($15,000+$12,000+$9,000) $36,000

Residual ($72,000) + ($24,000) + (49,000) $ (144,000)

Total ($57,000) + $33,000 + ($3,000) $ (27,000)