Question

Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $30,000, respectively; an allowance of interest at 12% on the capital balances at the beginning of the year; and the remaining net income divided equally. Net income for the current year was $110,000.
a. Present the Division of net income section of the income statement for the current year.
Net income $110,000

Rodgers Winter Total

Division of net income:
Salary allowance $ $ $
Interest allowance
Total
Net income $ $ $
b. Assuming that the net income had been $65,000 instead of $110,000, present the Division of net income section of the income statement for the current year.
Net income $65,000

Rodgers Winter Total
Division of net income:
Salary allowance $ $ $
Interest allowance
Total
Net income $ $ $

Answer 1

Answer:

A) Net income $110,000    

                                              Rodgers                Winter

Salary allowance                  $25,000                $30,000

interest allowance                  $7,200                 $10,800  

(12% of capital)                

split renaming income          $18,500                 $18,500  

net income                            $50,700                $59,300

B) Net income $65,000    

                                              Rodgers                Winter

Salary allowance                  $25,000                $30,000

interest allowance                  $4,000                  $6,000  

(40% of remaining income

to Rodgers and 60% to Winter)                                                  

net income                            $29,000                $36,000