Question

Dividing Partnership Net Income Required: Steve Jack and Chelsy Dane formed a partnership, dividing income as follows: 1. Annual salary allowance to Jack of $85,800. 2. Interest of 6% on each partner's capital balance on January 1. 3. Any remaining net income divided to Jack and Dane, 1:2. Jack and Dane had 596,000 and $87,000, respectively, in their January 1 capital balances. Net Income for the year was $156,000. How much is distributed to Jack and Dane? Note: Compute partnership share. Jack: $ Dane: $

Answer 1

Division of Net Income Total Jack Dane Salary allowance Interest allowance Total salaries and interest Remaining income/deficiency $ Total division of net income 85,800 $ $ $ 85,800 5,760 $ 91,560 $ 19,740 $ 10,980 ($ 96,000 6%) ($87,000* 6%) 5,220 $ 5,220 $ 39,480 $ 44,700 $ 96,780 59,220 ($59,220/3 1) ($59,220/3 2) 111,300 156,000 Remaining income 59,220 ($156,000 $96,780) Partnership share Jack 111,300 Dane 44,700