Ray Davies and Dave Davies formed a partnership, investing $750,000 and $220,000

Question

Ray Davies and Dave Davies formed a partnership, investing $750,000 and $220,000 respectively. The partnership agreement calls for a return of 6% interest on their original investment, Ray is to have a salary of $80,000 per year, Dave is to have a salary of $120,000 and the remainder divided in the ratio of 2:1. Determine the income distribution if the net income of the partnership for the year is $650,000. Given the information above, and with an additional investment in the partnership by Ray Davies of $70,000, and a withdrawal by Dave Davies of $12,000 please prepare a statement of Partner

Explanation / Answer

Return of 6% on (750000+220000) + 80000 + 120000 + X = 635000
=> 58200 + 200000 + X = 635000
=> X = 376800. in 2:1 ratio so, 2/3*376800 = 251200, and 1/3*376800 = 125600.
So answer is Ray Davies: 45,000 = 6%*750000 Dave Davies: 13200 = 6%*220000 salarly Ray Davies: 80000 Dave Davies: 120000
Rest Income ditribution Ray Davies: 251200 Dave Davies: 125600 income ditribution $ 376200 $ 258800
total distribution = income ditribution + initial investment = Ray Davies: $ 1126200 Dave Davies: $ 478800 After :: Investment : $ 70,000 Withdrawal: $ 12,000 Total : $ 11,96,200 Total : 4,66,800

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