Question

X and Y have original investments of $100,000 each in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest of 10% on original capital investment, salary allowance of 25,000 and 10,000 respectively, and the remainder divided based on the amount of original investment. How much of the net income is allocated to X and Y if net income is 92,000 for the year

Answer 1

Particulars	Amount	Calculation
Net Income	$       92,000
Less : Interest on Capital - X	$       10,000	(100000*10%)
Less : Interest on Capital - Y	$       10,000	(100000*10%)
Less : Salary Allowance - X	$       25,000
Less : Salary Allowance - Y	$       10,000
Remainder income	$       37,000
This remainder income will be divided between X & Y equally as their investment is equal in this partnership
Calculation of Income Earned by X & Y
Particulars	Amount
	X	Y
Interest on Investment	$       10,000	$           10,000
Salary	$       25,000	$           10,000
Remainder Income	$       18,500	$           18,500
Total Income Allocation	$       53,500	$           38,500