Question

Henry Carr and Noreen Mason formed a partnership, dividing income as follows: annual salary allowance to Carr of $40,000; interest of 8% on each partner's capital balance on January 1; any remaining net income is divided equally. Carr and Mason had $60,000 and $140,000 in their January 1 capital balances, respectively. Net income for the year was $440,000. How much net income should be distributed to Car?

Answer 1

Answer:

$192,000

Explanation:

Henry Carr and Noreen Mason formed a partnership, dividing income as follows:

1. Annual salary allowance to Carr of $40,000;

2. Interest of 8% on each partner's capital balance on January 1;

3. Any remaining net income is divided equally.

Carr and Mason had $60,000 and $140,000 in their January 1 capital balances, respectively.

Net income for the year was $440,000.

Total Net Income = 440,000

less:Annual salary allowance to Carr of ($40,000)

less:Interest of 8% on each partner's capital: 8% x ($60,000 + $140,000) which is (16000)

Balance to be divided among partners = 384,000

Net income to be distributed to Car = $192,000