Question

Blake and Matthew are partners who agree that Blake will receive a $100,000 salary allowance and that any remaining income or loss will be shared equally. If Matthew’s capital account is credited for $2,000 as his share of the net income in a given period, how much net income did the partnership earn in that period?

Answer 1

The total net income earned by the partnership is $204,000. This was calculated by considering Blake's $100,000 salary allowance and the equal division of the remaining $4,000, of which Matthew's $2,000 share is a part.

Step-by-step explanation:

To determine the total net income earned by the partnership in the given period when Blake will receive a $100,000 salary allowance and the remaining income or loss is shared equally between Blake and Matthew, we can set up a simple equation based on the information provided.

If Matthew's capital account is credited for $2,000 as his share, it means that after paying Blake's salary allowance, the remaining income is $4,000, since the remaining income is shared equally. Therefore, the total remaining income after Blake's salary is $100,000 (Blake's share) + $4,000 (divided between Blake and Matthew) = $104,000.

The total net income for the period is hence the sum of Blake's salary allowance and the remaining income, which is $100,000 + $104,000 = $204,000.

Answer 2

$1,004,000.

Step-by-step explanation:

We have been given that Blake and Matthew are partners who agree that Blake will receive a $100,000 salary allowance and that any remaining income or loss will be shared equally.

Matthew’s capital account is credited for $2,000 as his share of the net income in a given period.

Since both partners will get equal part of remaining income or loss, so Blake will get $2,000 as his share of the net income.

Total net income for the period would be Blake's salary allowance plus amount shared in both persons of net income.

`\text{Total net income}=\$1,000,000+\$2,000+\$2,000`

`\text{Total net income}=\$1,004,000`

Therefore, the total net income of the partnership in that period would be $1,004,000.