Question

Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $40,000 is allocated to Xavier?

A) $22,000
B) $32,000
C) $0
D) $20,000

Answer 1

A) $22,000

Step-by-step explanation:

The computation of the net income allocated to Xavier is shown below:

Particulars Xavier Yolanda Total

Capital $50,000 $100,000

Interest at 10% $5,000 $10,000 $15,000

Allowances $27,000 $18,000 $45,000

Now the net income allocated to xavier is

= $5,000 + $27,000 + ($40,000 - $15,000 - $45,000) × 50%

= $32,000 - $10,000

= $22,000