Question

19.

Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $30,000, respectively; an allowance of interest at 12% on the capital balances at the beginning of the year; and the remaining net income divided equally. Net income for the current year was $110,000.

a. Present the Division of net income section of the income statement for the current year.

Net income				$110,000
		Rodgers		Winter		Total
Division of net income:
	Salary allowance	$		$		$
	Interest allowance
	Total
Net income		$		$		$

b. Assuming that the net income had been $65,000 instead of $110,000, present the Division of net income section of the income statement for the current year.

Net income				$65,000
			Rodgers		Winter		Total
Division of net income:
	Salary allowance		$		$		$
	Interest allowance
	Total
Net income			$		$		$

Answer 1

Answer a.
Net Income			110,000.00
	Rodgers	Winter	Total
Division of Net Income:
Salary Allowance	25,000.00	30,000.00	55,000.00
Interest Allowance	7,200.00	10,800.00	18,000.00
Remaining Income	18,500.00	18,500.00	37,000.00
Net Income	50,700.00	59,300.00	110,000.00
Answer b.
Net Income			65,000.00
	Rodgers	Winter	Total
Division of Net Income:
Salary Allowance	25,000.00	30,000.00	55,000.00
Interest Allowance	7,200.00	10,800.00	18,000.00
Excess of Allowances Over Net Income	(4,000.00)	(4,000.00)	(8,000.00)
Net Income	28,200.00	36,800.00	65,000.00