Question
In: Accounting
Ramer and Knox began a partnership by investing $64,000 and $94,000, respectively. The partners agreed to...
Ramer and Knox began a partnership by investing $64,000 and $94,000, respectively. The partners agreed to share net income and loss by giving annual salary allowances of $52,000 to Ramer and $41,600 to Knox, 10% interest allowances on their investments, and any remaining balance shared equally. (Enter all allowances as positive values. Enter losses as negative values.) Required: 1. Determine each partner's share given a first-year net income of $102,800. 2. Determine each partner's share given a first-year net loss of $20,800.
Solutions
Expert Solution
Interest allowance to Ramer= Ramer Capital x Interest rate
= 64,000 x 10%
= $6,400
Interest allowance to Knox = Knox capital x Interest rate
= 94,000 x 7%
= $9,400
Total income = $102,800
Total of salary allowance and interest allowance = $109,400
Remaining Loss= Total of salary allowance and interest allowance- Total income
= 109,400-102,800
= $6,600
Ramer share of remaining loss= Remaining income x 1/2
= 6,600 x 1/2
= $3,300
Knox share of remaining loss= Remaining income x 1/2
= 6,600 x 1/2
= $3,300
| Ramer | Knox | Total | |
| Salary allowance | 52,000 | 41,600 | 93,600 |
| Interest allowance | 6,400 | 9,400 | 15,800 |
| Total | 58,400 | 51,000 | 109,400 |
| Remaining loss | -3,300 | -3,300 | -6,600 |
| Total income | 55,100 | 47,700 | 102,800 |
2.
Total loss= $20,800
Total of salary allowance and interest allowance = $109,400
Remaining Loss= Total of salary allowance and interest allowance+ Total loss
= 109,400+20,800
= $130,200
Ramer share of remaining loss= Remaining Loss x 1/2
= 130,200 x 1/2
= $65,100
Knox share of remaining loss= Remaining Loss x 1/2
= 130,200 x 1/2
= $65,100
| Ramer | Knox | Total | |
| Salary allowance | 52,000 | 41,600 | 93,600 |
| Interest allowance | 6,400 | 9,400 | 15,800 |
| Total | 58,400 | 51,000 | 109,400 |
| Remaining loss | -65,100 | -65,100 | -130,200 |
| Total loss | -6,700 | -14,100 | -20,800 |
ekkarill92 answered 2 years agoRelated Solutions
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