Question

Molly and Tim jointly purchased a property for $1,000,000. The investment property generated net annual rental...

Molly and Tim jointly purchased a property for $1,000,000. The investment property generated net annual rental income of $20,000. Molly put in $300,000 and Tim put in $700,000.

Required: Determine the profit/loss allocated to Molly and Tim.

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Answer #1

Answer :

profit allocated to Molly will be = $ 6,000

profit allocated to tim will be= $ 14,000

Calculation :

Cost of property = $ 1,000,000

A. Investment by Molly = $ 300,000

B. Investment by tim = $ 700,000

C. Total investment = A+ B = $ 1,000,000

Ratio of investment = molly : Tim = 3 : 7

Any income or profit will be divided in their ratio of investment

Rental income during the year $ 20,000

Assuming that no depreciation and losses on property is charged during the year.

The profit = rental income = $ 20,000

Profit allocated to Molly :

= $ 20,000 * 3 / 10

= 6,000

Profit allocated to Tim:

= $ 20,000 * 7 / 10

= 14,000

~~~ please upvote. Thanx.

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