The partnership agreement of Nieto, Keller, and Pickert provides for the following income ratio: (a) Nieto, the managing partner, receives a salary allowance of $36,000, (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: Nieto $200,000, Keller $400,000, and Pickert $600,000. If partnership net income is $180,000, the amount distributed to Nieto should be:

Question

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Nieto's share of partnership net income is calculated as follows:Salary allowance: $36,000Interest on average capital investment: $200,000 x 15% = $30,000Remaining net income: $180,000 - $36,000 - $30,000 = $114,000Nieto's share of remaining net income: $114,000 / 3 = $38,000Total distribution to Nieto: $36,000 + $30,000 + $38,000 = $104,000

The Partnership Agreement of Nieto, Keller, and Pickert Provides for the Following