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gizmo_the_mogwai [7]
3 years ago
10

The SRT partnership agreement specifies that partnership net income be allocated as follows:

Business
1 answer:
Assoli18 [71]3 years ago
3 0

Answer: Option (C) is correct.

Explanation:

Given that,

Partner S:

Salary allowance = $20,000

Interest on average capital balance = 10% of 60,000

                                                            = $6,000

Average capital balances for the current year = $60,000

Remainder = 30% of 50,000

                   = $15,000

Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder

                                                = $20,000 + $6,000 + $15,000

                                                = $41,000

Partner R:

Salary allowance = $25,000

Interest on average capital balance = 10% of 50,000

                                                            = $5,000

Average capital balances for the current year = $50,000

Remainder = 30% of 50,000

                  = $15,000

Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder

                                                = $25,000 + $5,000 + $15,000

                                                = $45,000

Partner T:

Salary allowance = $15,000

Interest on average capital balance = 10% of 40,000

                                                            = $4,000

Average capital balances for the current year = $40,000

Current year net income = $125,000

Remainder = 40% of 50,000

                  = $20,000

Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder

                                                = $15,000 + $4,000 + $20,000

                                                = $39,000

Workings:

Salary allowed = $20,000 + $25,000 + $15,000

                         = $60,000

Interest on average capital balance = $6,000 + $5,000 + $4,000

                                                            = $15,000

Total = Salary allowed  + Interest on average capital balance

        = $60,000 + $15,000

        = $75,000

Remainder = Current year net income - Total

                  = $125,000 - $75,000

                  = $50,000

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