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Lia Chen and Martin Monroe formed a partnership, dividing income as follows:Annual salary allowance to Chen of $35,000.Interest of 4% on each partner’s capital balance on January 1.Any remaining net income divided to Chen and Monroe, 2:1.Chen and Monroe had $90,000 and $140,000, respectively, in their January 1 capital balances. Net income for the year was $70,000.Required:How much net income should be distributed to Chen and Monroe?

Respuesta :

Answer:

$55,800  and $14,200

Explanation:

The computation of the distribution of the net income is presented below:

Particulars                                  Chen             Martin             Total

Opening capital balance           $90,000      $140,000         $230,000

Annual salary allowance (A)    $35,000                                $35,000

Interest @4% on

opening capital  (B)                   $3,600         $5,600            $9,200

Remaining income (C)              $17,200         $8,600            $25,800

Net income (A + B + C)           $55,800        $14,200          $70,000

The remaining income would be

= $70,000 - $35,000 - $9,200

= $25,800

And, the remaining income is divided between the partners in 2:1 ratio

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