Question

Dividing Partnership Net Income Han Lee and Monica Andrews formed a partnership, dividing income as follows: Annual salary allowance to Lee of $32,000. Interest of 4% on each partner's capital balance on January 1. Any remaining net income divided to Lee and Andrews, 2:1. Lee and Andrews had $80,000 and $150,000, respectively, in their January 1 capital balances. Net income for the year was $64,000. How much net income should be distributed to Lee and Andrews? Lee: $fill in the blank 1 Andrews: $fill in the blank 2

Answer 1

Han Lee and Monica Andrews Partnership

The net income that should be distributed to:

Lee = $50,400

Andrews = $13,600

Step-by-step explanation:

a) Data and Calculations:

Han Lee Monica Andrews Total

Capital accounts, Jan. 1 $80,000 $150,000 $230,000

Annual salary allowance 32,000 32,000

Interest on capital 3,200 6,000 9,200

Total allowances $41,200

Profit sharing 15,200 7,600 22,800

Net income $64,000

Total distribution $50,400 $13,600 $(64,000)