Question

ohn and Jack own a partnership. The partnership agreement contains
the below facts. How much net income will be distributed to
Jack?

Net Income (20X5) = $ 420,000

Beginning Capital Balances (2004)
John 110,000.00
Jack 120,000.00

Partnership Agreement
1) John receives a $ 30,000 salary each year.

2) Each partner receives a 10% allowance based on
the partner's beginning capital balance.

3) Any remainder will be split based on a 6:4 split
(John = 6 & Jack = 4).

What is the third number in the amount Jack will receive?

Number => _____ _____ __?__, _____ _____ _____

Answer 1

Net income = $420,000

John's capital, beginning = $110,000

Jack's capital, beginning = $120,000

Salary to John = $30,000

Allowance to John = John's capital x 10%

= 110,000 x 10%

= $11,000

Allowance to Jack = Jack's capital x 10%

= 120,000 x 10%

= $12,000

Remaining income available for distribution = Net income - Salary to John - Allowance to John - Allowance to Jack

= 420,000 - 30,000 - 11,000 - 12,000

= $367,000

Jack's share of remaining income = Remaining income available for distribution x Share of profit

= 367,000 x 4/10

= $146,800

Number = $146,800