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 $540000 the amount distributed to Alix should be

Question

Quizplus · Accepted Answer

First, calculate the interest on average capital investments for each partner: Alix: $600,000 * 15% = $90,000 Gise: $1,200,000 * 15% = $180,000 Bosco: $1,800,000 * 15% = $270,000. Total interest = $540,000. Since the net income is $540,000 and the total interest to be distributed equals the net income, there's no remaining net income to be divided equally. Therefore, Alix's total distribution is her salary allowance of $108,000 plus her interest of $90,000, totaling $198,000.

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