Question

Steve Queen and Chelsy Dane formed a partnership, dividing income as follows: Annual salary allowance to Dane of $125,400. Interest of 5% on each partner's capital balance on January 1. Any remaining net income divided to Queen and Dane, 1:2. Queen and Dane had $61,040 and $75,000, respectively, in their January 1 capital balances. Net income for the year was $220,000. How much is distributed to Queen and Dane? Note: Compute partnership share to two decimal places. Round final answers to the nearest whole dollar.

Answer 1

The income to be distributed as under:

Net income for the year		$    220,000.00
Less: Salary Allowance to Dane		$ (125,400.00)
Less: Interest on capital to;
Steve Queen	$            3,052.00
Chelsy Dane	$            3,750.00	$      (6,802.00)
Income available for distribution		$      87,798.00
Income distributed to;
Steve Queen	$         29,266.00
Chelsy Dane	$         58,532.00

Amount distributed to ;

Steve Queen	$         29,266.00
Chelsy Dane	$         58,532.00

Total amount received by partners:

	Steve Queen	Chelsy Dane
Salary allowance	0	$        125,400
Interest on capital	$    3,052	$            3,750
Income distributed in 1:2 ratio	$ 29,266	$          58,532
Total	$ 32,318	$        187,682

Calculations:

Interest on capital calculated as under
Steve Queen	61,040*5%
Chelsy Dane	75,000*5%

Income distribution calculated as under

Income distributed to;
Steve Queen	87,798*1/3
Chelsy Dane	87,798*2/3