Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $30,000, respectively; an allowance of interest at 12% on the capital balances at the beginning of the year; and the remaining net income divided equally. Net income for the current year was $110,000. a. Present the Division of net income section of the income statement for the current year. excess allowance over net inome/remaining income Net income $110,000 Rodgers Winter Total Division of net income: Salary allowance $ $ $ Interest allowance Total Net income $ $ $ b. Assuming that the net income had been $65,000 instead of $110,000, present the Division of net income section of the income statement for the current year. excess allowance over net inome/remaining income Net income $65,000 Rodgers Winter Total Division of net income: Salary allowance $ $ $ Interest allowance Total Net income $ $ $

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 3PB

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Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $30,000, respectively; an allowance of interest at 12% on the capital balances at the beginning of the year; and the remaining net income divided equally. Net income for the current year was $110,000.

a. Present the Division of net income section of the income statement for the current year.

excess allowance over net inome/remaining income

Net income			$110,000

	Rodgers	Winter	Total
Division of net income:
	Salary allowance	$		$		$
	Interest allowance
	Total

Net income	$		$		$

b. Assuming that the net income had been $65,000 instead of $110,000, present the Division of net income section of the income statement for the current year.

excess allowance over net inome/remaining income

Net income			$65,000

	Rodgers	Winter	Total
Division of net income:
	Salary allowance		$	$	$
	Interest allowance
	Total

Net income	$		$	$

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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