Asked Dec 19, 2019

John Prado and Ayana Nicks formed a partnership, dividing income as follows:
1. Annual salary allowance to Prado, $10,000 and Nicks, $28,000.
2. Interest of 5% on each partner’s capital balance on January 1.
3. Any remaining net income divided equally.
Prado and Nicks had $20,000 and $50,000, respectively, in their January 1 capital balances. Net income for the year was $30,000.
How much net income should be distributed to Prado and Nicks?


Expert Answer

Step 1

Image Transcriptionclose

The following table shows the division of net income between the partners. Total Annual salary allowance $10,000 $28,000 $38,000 $1,000 $2,500 Interest allowance $3,500 (1) (2) $11,000 $30,500 $41,500 Total $5,750 $5,750 Deduct: Remaining loss $11,500 (3) (4) Net income $5,250 $24,750 $30,000 Net Income received by member: $5,250 $24,750 $30,000 [Salary + Interest - share in loss]

Step 2

Image Transcriptionclose

Working note for the calculation of Interest allowance of P & N Interest Allowance is at 5%: Allowance ofP =( Capital at beginning of the fiscal year Interest 100 = $20,000 x 100 =$1,000 (1) Capital at beginning of the fiscal year = $50,000 x Interest 100 Allowance of N 100 =$2,500 (2)


Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in



Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A

Q: The following payments and receipts are related to land, land improvements, and buildings acquired f...

A: 1) Identify each item by letter and the list the amounts in columnar form.


Q: Journalizing the alternative treatment of deferred expenses On October 1, 2018, Kitchen Design paid ...

A: 1. Prepare journal entry for October 1 using alternative method of deferred expense.


Q: If a note provides for payment of principal of $85,000 and interest at the rate of 6%, will the inte...

A: Receivables:Receivables refer to an amount to be received in future. General classifications of rece...


Q: What is an accrued expense? Provide an example.

A: Accrued expense: This is the expense incurred but not yet paid. It is treated as liability until the...


Q: List the steps of the accounting cycle.

A: Accounting cycle:


Q: Holly Renfro contributed a patent, accounts receivable, and $20,000 cash to a partnership. The paten...

A: Partnership It is that form of organization which is owned and managed by two or more persons who in...


Q: Define Accounts payable and what are its representative cost driver?

A: Accounts payable: Accounts payable is the obligation of the company to make payment (within period o...


Q: Kathy Wintz formed a lawn service business as a summer job. To start the corporation on May 1, 2018,...

A: Click to see the answer


Q: “There’s no reason for me to get excited about the choice between the weighted-average and FIFO meth...

A: Weighted Average Method:Weighted average method is the method in which per unit cost is calculated b...