Question

X and Y have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to X?

Answer 1

Answer:

X would get $ 90,000 * 50,000/ 150,000= $ 30,000

Explanation:

Net income of $ 90,000 would be distributed in their profit sharing ratio which is 1:3 for X:Y

So X would get $ 90,000 * 50,000/ 150,000= $ 30,000

Y would get $ 90,000 * 100,000/ 150,000= $ 60,000

Net income is distributed after deduction of salaries and interest so it would not include the amount of salary  paid to partners.