Question

Dividing Partnership Net Income

Required:

Steve Conyers and Chelsy Bernard formed a partnership, dividing income as follows:

1. Annual salary allowance to Conyers of $112,560.
2. Interest of 5% on each partner's capital balance on January 1.
3. Any remaining net income divided to Conyers and Bernard, 1:2.

Conyers and Bernard had $60,000 and $81,000, respectively, in their January 1 capital balances. Net income for the year was $201,000. How much is distributed to Conyers and Bernard?

Note: Compute partnership share.
Conyers: $
Bernard: $

Answer 1

Correct Answer:

	Conyers	Bernard
Capital Balance	$          60,000	$             81,000
Total Distribution	$          30,130	$         1,70,870
Ending Balance	$          90,130	$         2,51,870

Working:

Distribution of Profit
	Conyers	Boxer	Total
Profit earned			$     2,01,000.00
Salary		$   1,12,560.00	$ (1,12,560.00)
Interest on Capital	$      3,000.00	$         4,050.00	$        (7,050.00)
Profit Balance left for Distribution			$        81,390.00
Balance distribution in ratio of 1:2	$    27,130.00	$       54,260.00	$      (81,390.00)
Total Distribution	$          30,130	$         1,70,870	$           2,01,000

End of answer.

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