68% 10.42 PM E 19-2A (LO3) 4. Wilson: $29,375 SHOW ME HOW ENTRIES FOR ALLOCATION
ID: 2607538 • Letter: 6
Question
68% 10.42 PM E 19-2A (LO3) 4. Wilson: $29,375 SHOW ME HOW ENTRIES FOR ALLOCATION OF NET INCOME Danny Spurlock and Tracy Wilson decided to form a partnership on July 1, 20-1. Spurlock invested $100,000 and Wilson invested $25,000. For the fiscal year ended June 30, 20-2, a net income of $80,000 was earned. Determine the amount of net income that Spurlock and Wilson would receive under each of the following independent assumptions: 1. There is no agreement concerning the distribution of net income Each partner is to receive 10% interest on their original investment. The remaining net income is to be divided equally. Spurlock and Wilson are to receive a salary allowance of $35,000 and $25,000, respectively. The remaining net income is to be divided equally 2. 3. 4. Each partner is to receive 10% interest on their original investment. Spurlock and Wilson are to receive a salary allowanceExplanation / Answer
Situation 1 when there is no agreement income is to be distributed equally
Spurlock
Wilsom
Total income distribution
40000 (80000*1/2)
40000 (80000*1/2)
Situation 2
Spurlock
Wilsom
Interest on investment
10000 (100000*10%)
2500 (25000*10%)
Remaining income (80000-10000-2500) is to be distributed equally
33750 (67500*1/2)
33750 (67500*1/2)
Total income distribution
43750
36250
Situation 3
Spurlock
Wilsom
Salary allowance
35000
25000
Remaining income (80000-35000-25000) is to be distributed equally
10000 (20000*1/2)
10000 (20000*1/2)
Total income distribution
45000
35000
Spurlock
Wilsom
Interest on investment
10000 (100000*10%)
2500 (25000*10%)
Salary allowance
35000
25000
Remaining income (80000-10000-2500-35000-25000) is to be distributed in the ratio of 75%:25%
5625 (7500*75%)
1875 (7500*25%)
Total income distribution
50625
29375
Spurlock
Wilsom
Total income distribution
40000 (80000*1/2)
40000 (80000*1/2)
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