Dividing Partnership Net Income Required: Steve Queen and Chelsy Bernard formed
ID: 2405615 • Letter: D
Question
Dividing Partnership Net Income Required: Steve Queen and Chelsy Bernard formed a partnership, dividing income as follows: Annual salary allowance to Queen of $135,700. Interest of 5% on each partner's capital balance on January 1. Any remaining net income divided to Queen and Bernard, 1:2. Queen and Bernard had $88,640 and $112,600, respectively, in their January 1 capital balances. Net income for the year was $230,000. How much is distributed to Queen and Bernard?
Note: Compute partnership share to two decimal places. Round final answers to the nearest whole dollar.
Queen: $
Bernard: $
Explanation / Answer
Annual salary to Queen = $135,700
Interest on Queen's capital = 88,640 x 5%
= $4,432
Interest on Bernard's capital = 112,600 x 5%
= $5,630
Remaining share of profit = 230,000 - 135,700 - 4,432 - 5,630
= $84,238
Hence, Queen's share of profit = 84,238 x 1/3
= $28,079.33
Bernard' share of profit = 84,238 x 2/3
= $56,158.67
Hence, Queen will get total = Salary + Interest on capital + Share of profit
= 135,700 + 4,432 + 28,079.33
= $168,211
Hence, Bernard will get total = Interest on capital + share of profit
= 5,630 + 56,158.67
= $61,789