Applying the interest allowance method,compute Julie and Jennifer's share of net income if Julie invested $40,000 and Jennifer invested $24,000 at an 8% interest rate,with the remainder to be divided equally.Net income was $10,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the interest allowance for Julie and Jennifer.

Julie's interest allowance = $40,000 x 8% = $3,200 
Jennifer's interest allowance = $24,000 x 8% = $1,920

Next, we need to subtract the interest allowance from the total net income:

Total interest allowance = $3,200 + $1,920 = $5,120 
Net income after interest allowance = $10,000 - $5,120 = $4,880

Finally, we need to divide the remaining net income equally between Julie and Jennifer:

Julie's share = $4,880 / 2 = $2,440 
Jennifer's share = $4,880 / 2 = $2,440

Adding the interest allowance to each person's share, we get:

Julie's total share = $3,200 + $2,440 = $5,640 
Jennifer's total share = $1,920 + $2,440 = $4,360

Therefore, the answer is C.

Applying the Interest Allowance Method,compute Julie and Jennifer's Share of Net