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 $109000, (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 $602000, Gise $1120000, and Bosco $1900000. If partnership net income is $532000, the amount allocated to Alix should be

The partnership agreement of Alix, Gise, and Bosco provides for the following income ratio: (a) Alix, the managing partner, receives a salary allowance of $105000, (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 $596000, Gise $1210000, and Bosco $1806000. If partnership net income is $738000, the amount allocated to Gise should be:

Answer 1

Part 1-

The amount allocated to Alix should be	$$
Interest on Average Capital ($602,000*15%)	$90,300
Salary allowance	$109,000
Net Income allocation (Loss 120,300 / 3) (Refer Note 1)	($40,100)
Total allocated amount to Alix	$159,200

Total allocated amount to Alix = $159,200

Note 1 –

Calculation of Profit/(Loss) to be distributed
Partnership Net Income	$532,000
Less: Interest on Average Capital Investment (602,000+1,120,000+1,900,000)*15%)	($543,300)
Less: Salary Allowance to Alix	($109,000)
Income/(Loss) of Partnership to be distributed	($120,300)

Part 2 –

The amount allocated to Gise should be	$$
Interest on Average Capital ($1,210,000*15%)	$181,500
Net Income allocation (91,200 / 3)	$30,400
Total allocated amount to Gise	$211,900

Amount allocated to Gise = $211,900

Note 1 –

Calculation of Profit/(Loss) to be distributed
Partnership Net Income	$738,000
Less: Interest on Average Capital Investment (596,000 + 1,210,000 + 1,806,000)*15%)	($541,800)
Less: Salary Allowance to Alix	($105,000)
Income/(Loss) of Partnership to be distributed	$91,200

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