Doug and Kayla formed a partnership with capital contributions of $220,000 and $320,000, respectively. Their partnership agreement calls for Doug to receive a $52,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $116,000, then Doug and Kayla's respective shares are:

Question

Jamison Tapia

Business

7 November, 10:34

Doug and Kayla formed a partnership with capital contributions of $220,000 and $320,000, respectively. Their partnership agreement calls for Doug to receive a $52,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $116,000, then Doug and Kayla's respective shares are:

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Answers (1)

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Annika Dyer · Answer 1

The correct answer is $79,000 and $37,000.

Explanation:

According to the scenario, the given data are as follows:

Net income = $116,000

Doug's Salary = $52,000

Receive an interest = 10%

So, the amount to be shared equally = [$116,000 - $52,000 - (10% * $220,000) - (10% * $320,000) ] : 2

= $5,000

So, Doug share = $52,000 + (10% * $220,000) + $5,000

= $79,000

Kayla share = (10% * $320,000) + $5,000 = $37,000