Question

Dividing Partnership Net Income Required: Steve Queen and Chelsy Stevens formed a partnership, dividing income as follows: 1. Annual salary allowance to Queen of $99,120. 2. Interest of 5% on each partner's capital balance on January 1. 3. Any remaining net income divided to Queen and Stevens, 1:2. Queen and Stevens had $81,000 and $117,000, respectively, in their January 1 capital balances. Net income for the year was $168,000. How much is distributed to Queen and Stevens? Note: Compute partnership share. Queen: $ Stevens: $

Answer 1

Answer-

Step 1: Calculate Partnership Share in Balance Net Income

The net income that will be distributed between the partners is calculated as below:

Balance Net Income (After all Adjustments) = Net Income for the Year - Salary Allowance to Queen - Total Interest on Capital

Using the values provided in the question in the above formula, we get,

Balance Net Income (After all Adjustments) = 168,000 - 99,120 - 5%*(81,000 + 117,000) = $58,980

Now, we can calculate the share of each partner as below:

Queen's Share in Balance Net Income = 58,980*1/3 = 19,660

Stevens's Share in Balance Net Income = 58,980*2/3 = 39,320

_____

Step 2: Calculate Amount Distributed to Jack and Dane

The value of total amount distributed to Jack and Dane is determined with the use of following table:

	Queen	Stevens
Salary Allowance	99,120	0.00
Interest on Capital	4,050 (81,000*5%)	5,850 (117,000*5%)
Balance Share in Net Income (from Step 1)	19,660	39,320
Total Amount Distributed	$122,830	$45,170

Total Amount Distributed to Queen = $122,830

Total Amount Distributed to Stevens= $45,170

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