Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at

Question

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. 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. Net income $65,000 Rodgers Winter Total Division of net income: Salary allowance $ $ $ Interest allowance Total Net income $ $ $

Explanation / Answer

Schedule Showing Allocation of Income: Rodgers Winter Total Net income for the year 110000 less: salary Allowance 25000 30000 55000 Remaining income 55000 Less: Interest on capital @ 12% 7200 10800 18000 Remaining income 37000 Share of remaining income 18500 18500 -37000 Total share of Income 50700 59300 0 Schedule Showing Allocation of Income: Rodgers Winter Total Net income for the year 65000 less: salary Allowance 25000 30000 55000 Remaining income 10000 Less: Interest on capital @ 12% 7200 10800 18000 Remaining Loss -8000 Share of Loss equally -4000 -4000 8000 Total share of Income 28200 36800 0

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