Question

Steve Jack and Chelsy Stevens formed a partnership, dividing income as follows: Annual salary allowance to Stevens of $176,130. Interest of 5% on each partner's capital balance on January 1. Any remaining net income divided to Jack and Stevens, 1:2. Jack and Stevens had $90,000 and $111,000, respectively, in their January 1 capital balances. Net income for the year was $309,000. How much is distributed to Jack and Stevens

Answer 1

Answer:

$45,440.00

Explanation:

Jack's interest on capital =5%*$90,000=$4,500.00

Stevens' interest on capital =5%*$111,000=$ 5,550.00  

Net income left to be shared in ratio 1:2 is the net income of $309,000 minus the total interest on capital of $10,050 i.e $4,500+$5,550 and salaries to Stevens

Net income left for sharing=$309,000-$10,050-$176,130=$ 122,820.00  

Jack's share of profit=1/3*$ 122,820.00   =$ 40,940.00    

Stevens' share of profits=2/3*$122,820.00  =$ 81,880.00  

Amount distributed to Jack=$4,500+$ 40,940=$45,440.00