Question

Dividing Partnership Net Income Required: Steve Prince and Chelsy Bernard formed a partnership, dividing income as follow 1. Annual salary allowance to Bernard of $135,090. 2. Interest of 6% on each partner's capital balance on January 1. 3. Any remaining net income divided to Prince and Bernard, 1:2. Prince and Bernard had $45,000 and $117,000, respectively, in their January 1 capital balances. Net income for the year was $237,000. How much is distributed to Prince and Bernard? Note: Compute partnership share. Prince: Bernard:

Answer 1

Answer:

Prince : $168,520

Bernard : $68,480

Explanation:

Particulars	Prince	Bernard	Total
Annual salary allowance	$135,090		$135,090
Interest Allowance (WN 1)	$2, 700	$7,020	$9,720
Remaining net income in the ratio 1:2 ( WN 2)	$30,730	$61,460	$92,190
Net Income	$168,520	$68,480	$237,000

WN 1: Interest on Capital

Prince = $45,000 * 6% = $2,700

Bernard = $117,000 * 6% = $7,020

WN 2 : Balance profit

Prince = $92,190 * 1/3 = $30,730

Bernard = $92,190 * 2/3 = $61,460