Question

The partnership agreement of Alix, Gise, and Bosco provides for the following income ratio: (a) Alix, the managing partner, receives a salary allowance of $102000, (b) each partner receives 15% interest on average capital investment, and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Alix $608000, Gise $1196000, and Bosco $1798000. If partnership net income is $720000, the amount allocated to Gise should be: $179400. $153500. $205300. $240000.

Answer 1

Option C is the Correct Answer

Amount Allocated to Gise = $ 205,300

Supporting Work:-

Particulars	Amount	Amount
Net Income		720,000
Less: Salary Allowance of Alix		(102,000)
Less: Interest on Average Capital Investments
For Alix (608,000 * 15%)	91,200
For Gise (11,96,000 * 15%)	179,400
For Bosco (17,98,000 * 15%)	269,700
Total Interest Payments		(540,300)
Net Income or Loss to be Shared Equally by Partner's		77,700

Net Income to be Shared by Each Partner = Total Net Income / 3

= 77,700 / 3

Share of Net Income for each Partner = $ 25,900

For Gise

Particulars	Amount
Share in Net Income	25,900
Interest on Capital Investments	179,400
Total Allocation to Gise	205,300