Question

Stone and Mill have decided to form a partnership.  They are in the process of agreeing on how the profits/losses will be divided.  Assume that the company is anticipating net income of $75,000 for the first time period. Determine Stone's share of the net income if the partner's agree on interest allowance of 10% on the original investments and annual salary allowance of $31,000 for Stone and $23,000 for Mill with the remainder equally. Further assume an original investment of $30,000 for Stone and $24,000 for Mill.

	Stone	Mill	Total
Interest Allowances (10%)
Salary Allowances	$31,000	$23000
Remainder Equally
Totals	?		$75,000

A. $33,200 B. $37,500 C. $41,800 D.$45,000

What are the steps to this question {answer $41,800}

Answer 1

	Stone	Mill	Total
Net Income			75,000
Less: Interest allowance	3,000	2,400	5,400
(10% of Investment )
Balance Income			69,600
Less: Salary Allowance	31,000	23,000	54,000
Balance Income			15,600
Less: Remainder equally	7,800	7,800	15,600
Balance Income			-
Share of partners	41,800	33,200
Correct answer is option C ( i..e $ 41,800 ).