Homework Answers
Given Capital Balances
R=50,000
J=18,800
M=40,000
Interest allowance 5% on the capital amount
Net income 75,000
Note: That salary for R and J is Recorded as Expenses which is already consolidated in net income , and salary for the M is not given so we can assume M does not work for the firm
Calculating Interest for the each partner
Interest for R
=(50,000)*5/100
=2500
Interest for J
=(18,800)*5/100
=940
Interest for M
=40,000*5/100
=2000
Total interest allowance =2500+940+2000 =5440
Remaining Net income is
Net income - Total Interest allowance =75,000-5440=69560
Remaining Balance is divided equally to all three
Hence it would be 69,560/3 =23186.67
Refer to the below table
| RJM we can fix it Partnership | ||||
| Partner R | Partner J | Partner M | Total | |
| Net Income | 75,000 | |||
| Interest allowances | 2500 | 940 | 2000 | 5440 |
| Remaining Income | 69,560 | |||
| Income Share | 23186.67 | 23186.67 | 23186.67 | 69560 |
| Capital | 50,000 | 18,800 | 40,000 | |
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Book:
Title: Framework for
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Author/s: Philip T.
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