The partnership agreement of Alix, Gise, and Bosco provides for the following income ratio: (a) Alix, the managing partner, receives a salary allowance of $107200, (b) each partner receives 15% interest on average capital investment, and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Alix $594000, Gise $1110000, and Bosco $1800000. If partnership net income is $544000, the amount allocated to Alix should be O $175200. O $166700. O $196300. O $89100.
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.
Answer)
Calculation of Amount allocated to Alix out of Net Income of $ 544,000
|
|
Alix |
Gise |
Bosco |
Total |
|
Salary |
$ 1,07,200 |
|
|
$1,07,200 |
|
Interest on Capital |
$ 89,100 |
$1,66,500 |
$2,70,000 |
$5,25,600 |
|
Balance Loss to be shared Equally |
$ -29,600 |
$ -29,600 |
$ -29,600 |
$ -88,800 |
|
Total |
$ 1,66,700 |
$1,36,900 |
$2,40,400 |
$5,44,000 |
Final Answer: Amount allocated to Alix is $ 166,700.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
