Question

Christie and Jergens formed a partnership with capital contributions of $360,000 and $460,000, respectively. Their partnership agreement calls for Christie to receive a $66,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally.
Required:
a. If the net income for the current year is $153,000, then Christie and Jergens's respective shares are ___________.
O $104,500; $48,500.
O $102,000; $46,000.
O $76,500; $76,500.
O $41,000; $112,000.
O $67,171; $85,829.

Answer 1

Answer:

Christie's share is $104500 while Jergens share is $48500. Thus, the first option is the correct answer.

Explanation:

The appropriation of net income among the partners will be as follows,

                                              $                   $

Net Income                                          $153000

Less: Salary to Partner

Christie                                                  (66000)

Less:Interest on Capital

Christie                               36000

Jergens                              46000        (82000)

Remaining Profit                                     5000

Distribution of Remaining Profit

Christie  (5000/2 = 2500)                       2500

Jergens  (5000/2 =2500)                       2500

Christie's Share = 66000 + 36000 + 2500    = $104500

Jergen's share = 46000 + 2500   = $48500