Question

Nabb & Fry Co. reports net income of $25,000. Interest allowances are Nabb $5,000 and Fry $4,000, salary allowances are Nabb $14,000 and Fry $10,000, the remainder is shared equally. Show the distribution of income. (If an amount reduces the account balance then enter with a negative sign preceding the number e.g. -15,000 or parenthesis e.g. (15,000).)

Answer 1

The net income of $25,000 is not sufficient to cover the combined allowances for Nabb and Fry, totaling $33,000. Therefore, each partner receives their respective allowances with Nabb receiving $19,000 and Fry receiving $14,000, with no remainder to distribute.

Step-by-step explanation:

The problem involves distributing net income in a partnership according to agreed allowances and sharing the remainder equally.

1. Calculate total allowances for both partners: Nabb (Interest $5,000 + Salary $14,000 = $19,000); Fry (Interest $4,000 + Salary $10,000 = $14,000).
2. Sum total allowances: $19,000 + $14,000 = $33,000.
3. Subtract total allowances from net income: $25,000 - $33,000 results in a negative amount which indicates there's no remainder to distribute, and the net income is not sufficient to cover total allowances.

Therefore, the distribution of income is as follows:

• Nabb: $19,000 (Nabb's total allowances as the net income doesn't cover more than allowances)
• Fry: $14,000 (Fry's total allowances as the net income doesn't cover more than allowances)

Since the net income is not enough to cover all allowances, there are no additional amounts to distribute equally between Nabb and Fry.

Answer 2

Hence Net allowances will be

NABB = gross allowance + remainder shared = $19000 - $4000 = $15000

FRY = gross allowance + remainder shared = $14000 - $4000 = $10000

Step-by-step explanation:

Nabb & Fry Co net income = $25000

Interest allowance

NABB : $5000

FRY: $4000

Salary allowance

NABB : $14000

FRY : $10000

Gross allowance of NABB = $14000 + $5000 = $19000

Gross allowance of FRY = $10000 + $4000 = $14000

Remainder

net income - ( Gross allowance of NABB + Gross allowance of FRY )

$25000 - $19000 + $14000 = - $8000

Remainder shared equally

NABB = -$4000

FRY = -$4000

Hence Net allowances will be

NABB = gross allowance + remainder shared = $19000 - $4000 = $15000

FRY = gross allowance + remainder shared = $14000 - $4000 = $10000