Question

Xavier and Yolanda have original investments of $49,300 and $99,800, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%; salary allowances of $29,700 and $30,800, respectively; and the remainder to be divided equally. How much of the net income of $109,400 is allocated to Xavier?

Answer 1

Net Income allocated to Xavier is $49100

Step-by-step explanation:

To calculate the Net Income allocation to Xavier, we need to determine the share of Xavier based on the partnership agreement and the remaining profit after deducting the salary and interest on original income for both partners.

The Net Income for the period is $109400.

Interest on Original Investment - Xavier = 49300 * 0.2 = 9860

Interest on Original Investment - Yolanda = 99800 * 0.2 = 19960

The remaining profit after deducting the interest on original income and salary of both partners is,

Remaining profit = 109400 - (9860 + 19960 + 29700 + 30800)

Remaining profit = $19080

The remaining profit will be shared equally. Thus, Xavier's share of remaining profit is 19080 / 2 = 9540.

Net Income allocated to Xavier:

Interest on original investment = 9860

Salary = 29700

Share of remaining profit = 9540

Total 49100