The partnership agreement of Alix Gise and Bosco provides for the following income ratio: (a) Alix the managing partner receives a salary allowance of $108000 (b) each partner receives 15% interest on average capital investment and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Alix $600000 Gise $1200000 and Bosco $1800000. If partnership net income is $720000 the amount distributed to Gise should be:

Question

Quizplus · Accepted Answer

Step 1: Calculate the total average capital investment: 
$600000 + $1200000 + $1800000 = $3600000 
Step 2: Calculate the interest on average capital investment for each partner: 
Alix: 15% x $600000 = $90000 
Gise: 15% x $1200000 = $180000 
Bosco: 15% x $1800000 = $270000 
Step 3: Calculate the remaining net income after Alix's salary allowance and interest payments: 
$720000 - $108000 - $90000 - $180000 - $270000 = $162000 
Step 4: Divide the remaining net income equally among the partners: 
$162000 ÷ 3 = $54000 each 
Step 5: Add up the interest payment and the equal share for each partner: 
Alix: $90000 + $54000 = $144000 
Gise: $180000 + $54000 = $234000 
Bosco: $270000 + $54000 = $324000 
Therefore, the amount distributed to Gise should be $234000, which corresponds to choice C.

The Partnership Agreement of Alix Gise and Bosco Provides for the Following