On January 1, Johnson invested $105,000 and Tyler invested $210,000 in a newly formed partnership. They agreed to salary allowances of $60,000 per year to Johnson and $40,000 per year to Tyler, plus an interest allowance of 10% based on the partners' capital balances on January 1. Any remaining income (loss) is to be shared equally. When net income is $105,000 for the year, the allocation of income to the partners is _____. $70,500 to Johnson; $61,000 to Tyler $52,500 to Johnson; $52,500 to Tyler $57,250 to Johnson; $47,750 to Tyler None of these choices are correct.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
On January 1, Johnson invested $105,000 and Tyler invested $210,000 in a newly formed partnership. They agreed to salary allowances of $60,000 per year to Johnson and $40,000 per year to Tyler, plus an interest allowance of 10% based on the partners' capital balances on January 1. Any remaining income (loss) is to be shared equally. When net income is $105,000 for the year, the allocation of income to the partners is _____.
- $70,500 to Johnson; $61,000 to Tyler
- $52,500 to Johnson; $52,500 to Tyler
- $57,250 to Johnson; $47,750 to Tyler
- None of these choices are correct.
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