Question

Joumana and Hala share profits and losses in a ratio of 5:3 respectively. Joumana and Hala receive salary allowances of $10,000 and $20,000 respectively, and both partners receive 5% interest based upon the balance in their capital accounts on January 1. Partners’ drawings are not used in determining the average capital balances. Total net income for 2019 is $80,000. If net income after deducting the interest and salary allocations is greater than $20,000, Hala receives a bonus of 7% of the original amount of net income.

Joumana Hala

January 1 capital balance $ 200,000 $ 300,000

Yearly drawings ($1,500 / month) $ 18,000 $ 18,000

What is the amount of net income allocated to Hala?

Select one:

a. $ 40,600

b. $ 30,000

c. $ 47,875

d. $ 35,000

Answer 1

Option c) is correct, $ 47,875

Please comment for any explanation,

Thanks,