Question

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

Schedule Showing Allocation of Income:
			Rodgers	Winter	Total
Net income for the year					110000
less: salary Allowance			25000	30000	55000
Remaining income					55000
Less: Interest on capital @ 12%			7200	10800	18000
Remaining income					37000
Share of remaining income			18500	18500	-37000
Total share of Income			50700	59300	0
Schedule Showing Allocation of Income:
			Rodgers	Winter	Total
Net income for the year					65000
less: salary Allowance			25000	30000	55000
Remaining income					10000
Less: Interest on capital @ 12%			7200	10800	18000
Remaining Loss					-8000
Share of Loss equally			-4000	-4000	8000
Total share of Income			28200	36800	0