Two recent business school, graduates, Jane Johns and Lou Schwartz, started a sh

Question

Two recent business school, graduates, Jane Johns and Lou Schwartz, started a shop called Exports Unlimited on January 1. Their partnership agreement stipulated that each would receive 10% on capital contributed and that they would share equally any net income in excess of this 10% payment. Jane had contributed $50,000 and Lou, $70,000. They also agreed that Jane, who could devote only part time to the venture, would receive a salary of $15,000, while Lou would receive $40,000. Net income for the first year (after deducting both partners' salaries) was $66,000. What was each partner's total income (including salaries) from the business?

Explanation / Answer

Distribution of Net Income Jane Lou Salary 15,000 40,000 10% of capital 5,000 7,000 Net Income share 27,000 27,000 Total $47,000 $74,000

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