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 partnership 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.

b. Assuming that the net income had been $65,000 instead of $110,000, present the Division of net income section of the income statement for the current year.

Net income

Answer 1

Solution a:

Schedule of Divison of income
Particulars	Rodgers	Winter	Total
Salary Allowance	$25,000.00	$30,000.00	$55,000.00
Interest Allowance	$7,200.00	$10,800.00	$18,000.00
Remaining Income (1:1)	$18,500.00	$18,500.00	$37,000.00
Net Income	$50,700.00	$59,300.00	$110,000.00

solution b:

Schedule of Divison of income
Particulars	Rodgers	Winter	Total
Salary Allowance	$25,000.00	$30,000.00	$55,000.00
Interest Allowance	$7,200.00	$10,800.00	$18,000.00
Remaining Income (1:1)	-$4,000.00	-$4,000.00	-$8,000.00
Net Income	$28,200.00	$36,800.00	$65,000.00