Question

Ramer and Knox began a partnership by investing $ 60,000 and $ 90,000, respectively.

Exercise 12-5 Part 2 Income allocation in a partnership LO P2

2. The partners agreed to share income and loss in proportion to their initial investments. Net income is $ 160,000. (Do not round intermediate calculations.)

Fraction to Allocate Ramer	Ramer's Share of Income	Fraction to Allocate Knox	Knox's Share of Income	Total Income Allocated

Exercise 12-5 Part 3 Income allocation in a partnership LO P2

3. The partners agreed to share income by giving a $ 50,000 per year salary allowance to Ramer, a $ 40,000 per year salary allowance to Knox, 10 % interest on their initial capital investments, and the remaining balance shared equally. Net income is $ 160,000. (Enter all allowances as positive values. Enter losses as negative values.)

	Ramer	Knox	Total
Net Income
Salary allowances
Interest allowances
Total salary and interest
Balance of income
Balance allocated equally
Balance of income
Shares of the partners

Answer 1

Correct Answer:

	Ramer	Knox	Total
Net Income (loss)			$ 1,60,000
Salary Allowance	$ 50,000	$ 40,000	$ 90,000
Balance of Income (Loss)			$ 70,000
Interest Allowance	$ 6,000	$ 9,000	$ 15,000
Balance of Income (Loss)			$ 55,000
Balance Allocated Equally	$ 27,500	$ 27,500	$ 55,000
Balance of Income (Loss)			$ -
Shares of The Partners	$ 87,500	$ 1,17,500