Turner, Ike, and Gibson Formed a Partnership in 2009 That

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The Answer is The error would have no effect on the amount of salaries allocated to the partners. However, Gibson's bonus in 2009 is overstated by $2,000. (Bonus error

The error would have no effect on the amount of salaries allocated to the partners. However, Gibson's bonus in 2009 is overstated by $2,000. (Bonus error 10%/[$22,000 error bonus error]). As a result of this overstatement, the deficit (resulting form the allocation of salaries, bonus, and interest) is overstated and Turner and Ike must absorb this share of this overstatement. Gibson, however, receives $2,000 more than she should and absorbs only $800 ($2,000 40%) of the resulting deficit. The failure to correct the error in 2009 will also unfairly affect the interest on capital for 2010. Although the error has no effect on the 2009 capital balances used, these balances are in total overstated by $22,000 at the end of 2010. The decision to offset the error against 2010 income versus beginning 2010 capital balances will result in allocating an overstated amount of interest to Turner and Gibson in 2010. Finally, to the extent that drawings may be related to capital balances, a time value of money factor must be considered.

10%/[$22,000 error

bonus error]). As a result of this overstatement, the deficit (resulting form the allocation of salaries, bonus, and interest) is overstated and Turner and Ike must absorb this share of this overstatement. Gibson, however, receives $2,000 more than she should and absorbs only $800 ($2,000

40%) of the resulting deficit. The failure to correct the error in 2009 will also unfairly affect the interest on capital for 2010. Although the error has no effect on the 2009 capital balances used, these balances are in total overstated by $22,000 at the end of 2010. The decision to offset the error against 2010 income versus beginning 2010 capital balances will result in allocating an overstated amount of interest to Turner and Gibson in 2010. Finally, to the extent that drawings may be related to capital balances, a time value of money factor must be considered.

Turner, Ike, and Gibson Formed a Partnership in 2009 That

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