In: Accounting
Tanner and Teresa share income and losses in a 2:1 ratio after allowing for salaries of $43,500 to Tanner and $62,400 to Teresa. Net income of the partnership is $134,700. Income should be divided as follows:
a.Tanner, $62,700; Teresa, $72,000
b.Tanner, $77,000; Teresa, $57,700
c.Tanner, $57,700; Teresa, $77,000
d.Tanner, $58,700; Teresa, $76,000
Sol. Calculation of Net Profit of Partnership
Net Income of the Partnershipe less- Salary of Tanner Less- Salary of Teresa Net Profit Of Partnershite $ 134,700 $ 43,500 $ 62,400 $ 28,800 Profit distribution Ratio of Tanner and Teresa =2:1
Tanner's share of Profit = $28,800 x 2 /3 =$19,200
Teresa's share of Profit =$28,800 x1/ 3= $9,600
Income of Tanner =>
Salary + Tanner's share of Profit
= $43,500 + $19,200 =$ 62,700
Income of Teresa => Salary + Teresa's share of Profit
=$ 62,400 +$ 9,600= $72,000
So, the Income should be divided as
Tanner, $ 62,700; Teresa, $72,000
option (a.) is correct.