Dividing Partnership Net Income Required: Steve Jack and Chelsy Poodle formed a
ID: 2329586 • Letter: D
Question
Dividing Partnership Net Income
Required:
Steve Jack and Chelsy Poodle formed a partnership, dividing income as follows:
Annual salary allowance to Jack of $176,400.
Interest of 5% on each partner's capital balance on January 1.
Any remaining net income divided to Jack and Poodle, 1:2.
Jack and Poodle had $77,600 and $82,520, respectively, in their January 1 capital balances. Net income for the year was $315,000. How much is distributed to Jack and Poodle?
Note: Compute partnership share to two decimal places. Round final answers to the nearest whole dollar.
Jack: $______
Poodle: $______
Explanation / Answer
Solution:
Given data
Annual salary allowance to jack = $176,400
Interest on each partner's capital balance on january 1 = 5%
Partnership ratio for jack and poodle = 1:2
Jack capital balance on january 1 = $77,600
Poodle capital bal;ance on january 1 = $82,520
Net income for the year = $315,000 .
Now, we calculate
Balance in net income after salary allowance and interest =
= $315,000 - $176,400 - (5% * ($77,600 + $82520))
= $315,000 - $176,400 - (5% * $160,120)
= $315,000 - $176,400 - $8,006
= $130,594
Now, now we need to find the partnership share
Jack's share: = 1/3 * $130,594
= $ 43,531.33
(+) salary allowance = $176,400
(+) 5% interest ($77,600 * 5%) = $ 3,880
= ($223,811.33)
Poodle's share: = 2/3 * $130,594
= $87,062.66
(+) 5% interest ($82,520 * 5%) = $4,126
= ($91,188.66)
Jack's share = $223,811.33
Poodle share = $ 91,188.66
Jack's share = $223,811.33
Poodle share = $ 91,188.66