Question

Emmett and Sierra formed a partnership dividing income as follows:

1. Annual salary allowance to Emmett of $38,800
2. Interest of 8% on each partner's capital balance on January 1
3. Any remaining net income divided equally.

Emmett and Sierra had $23,200 and $145,700, respectively in their January 1 capital balances. Net income for the year was $231,900.

How much net income should be distributed to Emmett?
$fill in the blank 1

Answer 1

	Emmett	Sierra	Total
Salary allowance	38,800	0	38,800
Interest allowance	1,856	11,656	13,512
Total	40,656	11,656	52,312
Remaining income	89,794	89,794	179,588
Net income	$130,450	$101,450	$231,900

Interest on capital of Emmett = 23,200 x 8%

= $1,856
Interest on capital of Sierra = 145,700 x 8%

= $11,656

Net income = $231,900

Total of salary and interest allowance = $52,312

Net income to be divided = Net income - Total of salary and interest allowance
= 231,900 - 52,312

= $179,588
Emmett share of income = 179,588 x 1/2

= $89,794
Sierra share of income = 179,588 x 1/2

= $89,794

Net income should be distributed to Emmett = $130,450