Question

Dividing Partnership Net Income Required: Steve Prince and Chelsy Dane formed a partnership, dividing income as follows: Annual salary allowance to Prince of $162,400. Interest of 7% on each partner's capital balance on January 1. Any remaining net income divided to Prince and Dane, 1:2. Prince and Dane had $61,040 and $75,000, respectively, in their January 1 capital balances. Net income for the year was $290,000. How much is distributed to Prince and Dane? Note: Compute partnership share to two decimal places. Round final answers to the nearest whole dollar. Prince: $ Dane: $

Answer 1

• All working forms part of the answer
• Working

Partnership shares:

Steve = 1/3 = 0.33

Chelsy = 2/3 = 0.67

			Net Income
	Steve Prince	Chelsy Dane	Net Income distributed	Undistributed Net Income
				$            290,000
Salary Allowance	$              162,400		$            162,400	$            127,600
Interest on Capital	$                   4,273	$                  5,250	$                 9,523	$            118,077
Remaining Net Income	$                 38,965 [118077 x 0.33]	$                79,112 [118077 x 0.67]	$            118,077	$                         0
Total Net Income Distributed	$              205,638	$                84,362	$            290,000

• Answer

Amount distributed to Prince	$              205,638
Amount distributed to Chelsy	$                 84,362

[Mention in a comment if there’s any error, because the same might exist due to rounding off differences]