Problem

A has a one-fourth and B a three-fourths interest in a partnership that operates a toy manufacturing company. The partnership files its partnership return on the calendar-year basis. The partnership books disclose the following information for the current calendar year:

Sales                                                                                                      $235,000
Returns and allowances                                                                            10,000
Opening inventory                                                                                   50,000
Purchases                                                                                               50,000
Cost of labor and supplies                                                                        105,000
Closing inventory                                                                                     61,000
Royalties received for use of a patent                                                         1,100
Salaries                                                                                                   26,000
Guaranteed payments to partners (8,400 to each)                                       16,800
Rent paid                                                                                                 17,000
Interest expense on business debt ( other than payments to partners)          550
Taxes                                                                                                      8,500
Bad debt written off                                                                                  1,000
Repairs                                                                                                    3,000
Depreciation                                                                                             2,470
Light, postage, stationery, ect.                                                                   1,680
Net long-term capital gain                                                                          600
Dividends                                                                                                 200

Compute the partnership income and the partner's distributive shares of items that are required to be separated stated.