Question

Emmett and Sierra formed a partnership dividing income as follows:

1. Annual salary allowance to Emmett of $43,100
2. Interest of 8% on each partner's capital balance on January 1
3. Any remaining net income divided equally.

Emmett and Sierra had $38,200 and $120,300, respectively in their January 1 capital balances. Net income for the year was $215,700.

How much net income should be distributed to Emmett?

Answer 1

Correct Answer:

Net income distributed to Emmet = $ 126,116

Working:

Net income	$          215,700
	Emmet	Sierra	Total
Annual Salary Allowance	$            43,100	$               -	$            43,100
Balance			$          172,600
Interest on capital @ 8%	$              3,056	$        9,624	$            12,680
Balance			$          159,920
remaining income divided equally	$            79,960	$     79,960	$          159,920
Balance			$                     -
Share in net income	$          126,116	$     89,584	$          215,700

End of answer.

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