Question

Steve Queen and Chelsy Boxer formed a partnership, dividing income as follows:

1. Annual salary allowance to Queen of $111,510.

2. Interest of 6% on each partner's capital balance on January 1.

3. Any remaining net income divided to Queen and Boxer, 1:2.

Queen and Boxer had $60,000 and $99,000, respectively, in their January 1 capital balances. Net income for the year was $189,000. How much is distributed to Queen and Boxer?

Note: Compute partnership share.

Queen: $

Boxer: $

Answer 1

	Share of Queen	Share of Boxer	Total
Salary Allowance	$111,510	$0
Add: Interest on Capital ($60,000*6/100); ($99,000*6/100)	$3,600	$5,940
Sub Total	$115,110	$5,940	$121,050
Add: Share of balance of net income ($67,950*1/3); ($67,950*2/3)	$22,650	$45,300
Total amount distributed to Queen & Boxer	$137,760	$51,240
Working notes:
Net Income for the year	$189,000
Less: Salary and interest on capital	($121,050)
Remaining balance of Net Income	$67,950

Therefore, partnership share allocated to -

Queen - $137,760

Boxer - $51,240