Question

Blake and Matthew are partners who agree that Blake will receive a $100,000 salary allowance and that any remaining income or loss will be shared equally. If Matthew’s capital account is credited for $2,000 as his share of the net income in a given period, how much net income did the partnership earn in that period?

Answer 1

Answer:

$1,004,000.

Explanation:

We have been given that Blake and Matthew are partners who agree that Blake will receive a $100,000 salary allowance and that any remaining income or loss will be shared equally.

Matthew’s capital account is credited for $2,000 as his share of the net income in a given period.

Since both partners will get equal part of remaining income or loss, so Blake will get $2,000 as his share of the net income.

Total net income for the period would be Blake's salary allowance plus amount shared in both persons of net income.

$\text{Total net income}=\ 1,000,000+\ 2,000+\ 2,000$

$\text{Total net income}=\ 1,004,000$

Therefore, the total net income of the partnership in that period would be $1,004,000.