Question

Dividing Partnership Net Income Han Lee and Monica Andrews formed a partnership, dividing income as follows: Annual salary allowance to Lee of $32,000. Interest of 4% on each partner's capital balance on January 1. Any remaining net income divided to Lee and Andrews, 2:1. Lee and Andrews had $80,000 and $150,000, respectively, in their January 1 capital balances. Net income for the year was $64,000. How much net income should be distributed to Lee and Andrews? Lee: $fill in the blank 1 Andrews: $fill in the blank 2

Answer 1

Answer:

Han Lee and Monica Andrews Partnership

The net income that should be distributed to:

Lee = $50,400

Andrews = $13,600

Explanation:

a) Data and Calculations:

                                        Han Lee     Monica Andrews   Total

Capital accounts, Jan. 1  $80,000         $150,000        $230,000

Annual salary allowance  32,000                                      32,000

Interest on capital              3,200                6,000              9,200

Total allowances                                                               $41,200

Profit sharing                   15,200                 7,600            22,800

Net income                                                                      $64,000

Total distribution          $50,400             $13,600        $(64,000)