Question

The partnership agreement of Alix, Gise, and Bosco provides for the following income ratio: (a) Alix, the managing partner, receives a salary allowance of $107200, (b) each partner receives 15% interest on average capital investment, and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Alix $594000, Gise $1110000, and Bosco $1800000. If partnership net income is $544000, the amount allocated to Alix should be

$166700.

$175200.

$196300.

$89100.

Answer 1

	Alix	Gise	Bosco	Total
Salary allowance	107,200	0	0	107,200
Interest allowance	89,100	166,500	270,000	525,600
Total	196,300	166,500	270,000	632,800
Remaining loss	-29,600	-29,600	-29,600	-88,800
Total amount distributed	166,700	136,900	240,400	544,000

Interest allowance to Alix = Average capital investments x 15%

= 594,000 x 15%

= $89,100

Interest allowance to Gise = Average capital investments x 15%

= 1,110,000 x 15%

= $166,500

Interest allowance to Bosco = Average capital investments x 15%

= 1,800,000 x 15%

= $270,000

Amount of loss = Net income - Total of salary allowance and interest allowance

= 544,000 - 632,800

= -$88,800

LOss allocated to Alix = 88,800 x 1/3

= $29,600

LOss allocated to Gise = 88,800 x 1/3

= $29,600

LOss allocated to Bosco = 88,800 x 1/3

= $29,600

The amount allocated to Alix should be = $166,700

Correct option is first

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