Question

Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000, respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Farmer and Taylor's respective shares are:

Answer 1

Answer:

Farmer and Taylor's respective shares are $102,500 and $32,500

Explanation:

For computing their respective shares, first we have to calculate the remaining income of each partner is shown below:

Remaining income = Net income - received amount

                               = $135,000 - $70,000

                              = $65,000

It will be divided equally in 1:1 ratio

So, the remaining income would be

Farmer = $32,500

Taylor = $32,500

Now, Their shares would be

Farmer = Salary received + his share of income

            = $70,000 + $32,500

            = $102,500

And, for Taylor it would be $32,500