Martha and Jones have capital balances on January 1 of $50,000 and $40,000, resp

Question

Martha and Jones have capital balances on January 1 of $50,000 and $40,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $20,000 for Martha and $12,000 for Jones, (2) interest at 10% on beginning capital balances, and (3) remaining income or loss to be shared 60% by Martha and 40% by Jones. (a) (If an amount reduces the account balance then enter with a negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) (1) Prepare a schedule showing the distribution of net income, assuming net income is $50,000. (2) Prepare a schedule showing the distribution of net income, assuming net income is $36,000.

Explanation / Answer

1. Net Income = $50000 Annual salaries= Martha(20000), Jones(12000) Balance= $18000 Interest = Martha= (5000), Jones= (4000) Balance = $9000 = profit Martha takes 60% of 9000 = 5400 Jones takes 40% of 9000= 3600 2. Net Income= $36000 Annual salaries= Martha(20000), Jones(12000) Balance= $4000 Interest = Martha= (5000), Jones= (4000) Balance = $(5000)= loss Martha bears 60% of 5000 = 3000 Jones bears 40% of 5000= 2000

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.