Question

Saul Goodman, Jesse Pinkman, and Walter White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following:

 (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; 

(2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: 

(a) 20% for Goodman; 

(b) 40% for Pinkman; and 

(c) 40% for White. 

Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021. What was White’s total share of net income for 2021?

            A)    $99,060. 
            B)    $126,900.
            C)    $62,160.
            D)    $93,060.
            E)    $96,000.

Answer 1

Answer 2

What was White’s capital balance at the end of 2020?

White's capital
Beginning capital	250000
Add: Share in net income	77000
Less: Drawings	-1500*12= -18000
Balance at end of 2020	309000

Working :

Share in net income :

	Goodman	Pinkman	White	Total
Interest on capital	125000*10%=12500	175000*10%=17500	250000*10%=25000	55000
Salary allowance		15000		15000
Remaining income [200000-55000-15000=130000]	130000*20%=26000	130000*40%=52000	52000	130000
Total share in net income for year 2020	38500	84500	77000	200000