PE 12-2B Dividing partnership net income

Alex Conyers and Shaunika Stevens formed a partnership, dividing income as follows:

1. Annual salary allowance to Stevens of $45,000.
2. Interest of 8% on each partner’s capital balance on January 1.
3. Any remaining net income divided equally.
Conyers and Stevens had $50,000 and $160,000, respectively, in their January 1 capital balances. Net income for the year was $200,000.

How much net income should be distributed to Stevens?

Answer:

Distributed to Conyers and Stevens:  Conyers Stevens  Total   Annual salary.................................................. $ — $ 45,000 $ 45,000 Interest............................................................  4,0001  12,8002  16,800 Remaining income .........................................  69,100  69,1003  138,200 Total distributed to partners ......................... $73,100 $126,900 $200,000  1$50,000 × 8% 2$160,000 × 8% 3($200,000 – $45,000 – $16,800) × 50%  



Stevens: $126,900

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