Question

Dividing Partnership Net Income Required: Steve Queen and Chelsy Bernard formed a partnership, dividing income as follows: Annual salary allowance to Queen of $135,700. Interest of 5% on each partner's capital balance on January 1. Any remaining net income divided to Queen and Bernard, 1:2. Queen and Bernard had $88,640 and $112,600, respectively, in their January 1 capital balances. Net income for the year was $230,000. How much is distributed to Queen and Bernard?

Note: Compute partnership share to two decimal places. Round final answers to the nearest whole dollar.

Queen: $

Bernard: $

Answer 1

Annual salary to Queen = $135,700

Interest on Queen's capital = 88,640 x 5%

= $4,432

Interest on Bernard's capital = 112,600 x 5%

= $5,630

Remaining share of profit = 230,000 - 135,700 - 4,432 - 5,630

= $84,238

Hence, Queen's share of profit = 84,238 x 1/3

= $28,079.33

Bernard' share of profit = 84,238 x 2/3

= $56,158.67

Hence, Queen will get total = Salary + Interest on capital + Share of profit

= 135,700 + 4,432 + 28,079.33

= $168,211

Hence, Bernard will get total = Interest on capital + share of profit

= 5,630 + 56,158.67

= $61,789