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 $ $ $

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.

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 $110,000 Rodgers Winter Total Division of net income: Salary allowance $ $ $ Interest allowance Total Net income $ $ $

Explanation / Answer

Answer a. Rodgers Winter Total Net Income    110,000.00 Salary Allowance    25,000.00    30,000.00      55,000.00 Interest Allowance      7,200.00    10,800.00      18,000.00 Balance      37,000.00 Divided between Partners equally    18,500.00    18,500.00      37,000.00 Total    50,700.00    59,300.00 Answer b. Rodgers Winter Total Net Income      65,000.00 Salary Allowance    25,000.00    30,000.00      55,000.00 Interest Allowance      7,200.00    10,800.00      18,000.00 Balance      (8,000.00) Divided between Partners equally    (4,000.00)    (4,000.00)      (8,000.00) Total    28,200.00    36,800.00

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