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

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 percent on capital contributed and that they would share equally any net income in excess of this 10 percent 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 $66000. 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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