Question

The partnership agreement of J. Hansen and D. Hernandez reflects differences in service and capital contributions as follows: (1) annual salary allowances of $30,000 to Hansen and $10,000 to Hernandez; (2) annual interest allowances of 10% of a partner's beginning-year capital balance, and (3) equal share of any remaining balance of income or loss. Both partners had beginning-year capital balances of $50,000. In the first year, the partnership makes $100,000. How much income would be allocated to Hansen?

Answer 1

Answer:

$60,000

Explanation:

Hansen's annual salary allowance= 30,000

Hernandez's  annual salary allowance= 10,000

annual interest allowance of Hensen= 0.1 × 50,000= 5000

annual interest allowance of Hernandez= 0.1 × 50,000= 5000

Remaining balance=100000- 5000-5000-30000-10000= 50000

Share of each partner from remaining balance= 25000

Hensen's income= 25,000+ 5000+ 30000= 60,000

Answer 2

Answer:

$60,000 allocated to Hansen

Explanation:

total income generated by the partnership: $100,000

• - salary allowance Hansen = ($30,000)
• - salary allowance Hernandez = ($10,000)
• - interest on capital balance Hansen = ($5,000)

- interest on capital balance Hernandez = ($,5000)  

net profit to be distributed = $50,000

profit distribution:

• $25,000 to Hansen
• $25,000 to Hernandez

Total income allocated to Hansen = salary + interests + profit distribution = $30,000 + $5,000 + $25,000 = $60,000

Total income allocated to Hernandez = salary + interests + profit distribution = $10,000 + $5,000 + $25,000 = $40,000