Question

Rodgers and winter had capital balances of $60,000 and 90,000, respectively, at the beginning of the current fiscal year. The articles of partrarship provide for Salary allowances of $25.000 and $30,000, respectively, an allowance of interest at 12% on the capital balances at the beginning of the year and the remaining net income divided equally. Net income for the current year was $110,000 a. Present the Division of net income section of the income statement for the current year Net income $110,000 Rodgers Winter Division of net income Salary allowance Interest allowance Total Net income b. Assuming that the net income had been $65.000 instead of $110.000, present the Division of rat income section of the income statement for Net income $65,000 Winter Total Division of net income Salary allow Interest owne < Previous

Answer 1

Answer:

(a)

Given:

Net Income=$1,10,000

salary allowance=$25,000 &$ 30,000

Interest allowance=$7,200(60,000*12/100)[12% on capital]

=$10,800(90,000*12/100)[12% on capital]

Particulars	Rodgers	Winter	Total
Net Income			$1,10,000
Salary allowance	$25,000	$30,000	=25,000+30,000=$55,000
Interest allowance	$7,200	$10,800	=7,200+10,800=$18,000
Balance			=1,10,000-55,000-18,000=$37,000
Balance amount given equally to partners	$18,500(37,000/2)	$18,500(37,000/2)	$37,000
Total's of Rodgers & winters	$50,700	$59,300

(b)

Given :

Net income=$65,000

salary allowance=$25,000 &$ 30,000

Interest allowance=$7,200(60,000*12/100)[12% on capital]

=$10,800(90,000*12/100)[12% on capital]

Particulars	Rodgers	Winter	Total
Net income			$65,000
Salary allowance	$25,000	$30,000	=25,000+30,000=$55,000
Interest allowance	$7,200	$10,800	=7,200+10,800=$18,000
Balance			=65,000-55,000-18,000=($8,000) outflow
Balance amount given equally to partners	($4,000)[8,000/2]	($4,000)[8,000/2]	($8,000)
Total's of Rodgers & winters	25,000+7,200-4,000=$28,200	30,000+10,800-4,000=$36,800