X and Y have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to X?

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5 June, 08:21

X and Y have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to X?

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Princess Owens · Answer 1

X would get $ 90,000 * 50,000 / 150,000 = $ 30,000

Explanation:

Net income of $ 90,000 would be distributed in their profit sharing ratio which is 1:3 for X:Y

So X would get $ 90,000 * 50,000 / 150,000 = $ 30,000

Y would get $ 90,000 * 100,000 / 150,000 = $ 60,000

Net income is distributed after deduction of salaries and interest so it would not include the amount of salary paid to partners.