Question

Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $105,000 in income are:

Answer 1

$57500 to Zheng and $ 47500 to Murray

Explanation:

Allocation of Net income Zheng Murray Total

Total Net income 105000

Less: Salary allowance 60000 40000 -100000

Remaining income 5000

Less: Interest on capital 10% 10000 20000 - 30000

Remaining Loss -25000

Share equally -12500 -12500 25000

Share of partners 57500 47500 0