Question

The net income of the Rice and Nance partnership is $300,000. The partnership agreement specifies that Rice and Nance have a salary allowance of $80,000 and $120,000, respectively. The partnership agreement also specifies an interest allowance of 10% on capital balances at the beginning of the year. Each partner had a beginning capital balance of $200,000. Any remaining net income or net loss is shared equally. What is Rice's share of the $300,000 net income? Group of answer choices $80,000 $100,000 $110,000 $130,000

Answer 1

Answer:

d. $130,000

Explanation:

Particulars                          Amount

Net income of firm             $300,000

Less: Salary                        $200,000 (Rice $80000 + Nance $120000)

Less: Interest on capital    $40,000   (Rice $20000 + Nance $20000)

Net income attributable to partners $60,000

Rice's share in net income = $60,000 * 1/2

Rice's share in net income = $30,000

Rice's share of the $300,000 net income = Salary + Interest on capital + Share in net income

Rice's share of the $300,000 net income = $80,000 + $20,000 + $30,000

Rice's share of the $300,000 net income = $130,000