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24 December, 05:29

Fred and Barney started a partnership. Fred invested $20,000 in the business and Barney invested $32,000. The partnership agreement stipulated that profits would be divided as follows: Each partner would receive a 15% return on invested capital with the remaining income being distributed equally between the two partners. Assuming that the partnership earned $38,000 during an accounting period, the amount of income assigned to the two partners would be:

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  1. 24 December, 05:47
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    The amount of income assigned to the two partners would be $18,100 and $19,900 respectively.

    Explanation:

    For computing the amount of income assigned to the two partners, we have to do the following calculations which are shown below:

    1. Dividend amount for each partner:

    For Fred = Invested amount * rate of return

    = $20,000 * 15%

    =$3,000

    For Barney = Invested amount * rate of return

    = $32,000 * 15%

    = $4,800

    The total dividend amount equals to

    = Fred dividend + barney dividend

    = $3,000 + $4,800

    = $7,800

    2. Now compute the remaining amount, and divide it in the sharing ratio

    So, the remaining amount would be

    = Partnership income - total dividend amount

    = $38,000 - $7,800

    = $30,200

    So the Fred income would be = $30,200 * 50% = $15,100

    And, the barney income would be = $30,200 * 50% = $15,100

    So, the amount of income:

    For Fred = Dividend income + remaining income

    = $3,000 + $15,100

    = $18,100

    For Barney = Dividend income + remaining income

    =$4,800 + $15,100

    = $19,900

    Hence, the amount of income assigned to the two partners would be $18,100 and $19,900 respectively.
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