The net income of the Crowe and Browning partnership is $450,000. The partnershi
ID: 2540646 • Letter: T
Question
The net income of the Crowe and Browning partnership is $450,000. The partnership agreement specifies that Crowe and Browning have a salary allowance of $120,000 and S180,000, respectively. The partnership agreement also specifies an interest allowance of 10% on capital balances at the beginning of the year. Each partner had a beginning capital balance of $300,000. Any remaining net income or net loss is shared equally 5, What is Crowe's share of the $450,00 net income? a. $120,000 b. $150,000 c. $165,000 d. $195,000Explanation / Answer
Net Income = $450,000
Partners Salary:
Crowe = $120,000
Browning = $180,000
Total Salary = $120,000 + $180,000
Total Salary = $300,000
Interest on Capital = 10%
Crowe = 10%*$300,000 = $30,000
Browning= 10%*$300,000 = $30,000
Total Interest on Capital = $30,000 + $30,000
Total Interest on Capital = $60,000
Divisible Net Income = Net Income - Total Salary - Total Interest on Capital
Divisible Net Income = $450,000 - $300,000 - $60,000
Divisible Net Income = $90,000
Divisible net income is equally distributed between partners.
Crowe = 50% * $90,000 = $45,000
Browning = 50% * $90,000 = $45,000
Total Share of Crowe in Net Income = Salary + Interest on Capital + Divisible Net Income
Total Share of Crowe in Net Income = $120,000 + $30,000 + $45,000
Total Share of Crowe in Net Income = $195,000
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