Partners Kim and Xu receive a yearly salary of $125,000 and $150,000, respectively, plus interest of 5% on weighted average capital for the year. Partnership income for the year, before any distributions to partners, is $400,000. Weighted average capital balances for Kim and Xu are $600,000 and $520,000, respectively. Assume full implementation.
Required
Calculate the bonus for the year for each partner, in each of the following situations:
a. Kim gets a bonus of 4 percent of partnership income before distributions.
b. Xu gets a bonus of 25 percent of partnership income after salaries and interest.
c. Kim gets a bonus of 25 percent of partnership income after salaries, interest, and his bonus.

Question

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The Answer of Partners Kim and Xu receive a yearly salary of $125,000 and $150,000, respectively, plus interest of 5% on weighted average capital for the year. Partnership income for the year, before any distributions to partners, is $400,000. Weighted average capital balances for Kim and Xu are $600,000 and $520,000, respectively. Assume full implementation.
Required
Calculate the bonus for the year for each partner, in each of the following situations:
a. Kim gets a bonus of 4 percent of partnership income before distributions.
b. Xu gets a bonus of 25 percent of partnership income after salaries and interest.
c. Kim gets a bonus of 25 percent of partnership income after salaries, interest, and his bonus.

Partners Kim and Xu Receive a Yearly Salary of $125,000