Question

Dividing Partnership Net Income Required: Steve Conyers and Chelsy Poodle formed a partnership, dividing income as follows: 1. Annual salary allowance to Poodle of $109,740. 2. Interest of 7% on each partner's capital balance on January 1. 3. Any remaining net income divided to Conyers and Poodle, 1:2. Conyers and Poodle had $57,000 and $99,000, respectively, in their January 1 capital balances. Net income for the year was $186,000. How much is distributed to Conyers and Poodle? Note: Compute partnership share. Conyers: $ Poodle: $

Answer 1

Net income = $186,000

Annual salary to Poodle = $109,740

Interest on Conyer's capital = 57,000 x 7%

= $3,990

Interest on Poodle's capital = 99,000 x 7%

= $6,930

Remaining share of profit = Net income - Annual salary to Poodle - Interest on Conyer's capital - Interest on Poodle's capital

= 186,000 - 109,740 - 3,990 - 6,930

= $65,340

Hence, Conyer's share of profit = 65,340 x 1/3

= $21,780

Poodle's share of profit = 65,340 x 2/3

= $43,560

Hence, Conyers will get total = Interest on capital + share of profit

= 3,990 + 21,780

= $25,770

Hence, Poodle will get total = Salary + Interest on capital + Share of profit

= 109,740 + 6,930 + 43,560

= $160,230

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