Applying the interest allowance method,compute Taylor and Timmy's share of net income if Taylor invested $200,000 and Timmy invested $800,000 at a 6% interest rate,with the remainder to be divided equally.Net income was $75,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the total interest earned on the investments for Taylor and Timmy. 
For Taylor: 200,000 x 0.06 = 12,000 
For Timmy: 800,000 x 0.06 = 48,000

So, the total interest earned is $60,000. 
Now, we deduct the interest from the net income: 
75,000 - 60,000 = 15,000

Since the remainder is to be divided equally, it is divided among Taylor and Timmy. 
Each of them gets $15,000 ÷ 2 = $7,500.

Adding this to their respective interest, we have: 
Taylor: 12,000 + 7,500 = 19,500 
Timmy: 48,000 + 7,500 = 55,500

Therefore, Taylor's share is $19,500 and Timmy's share is $55,500. So the correct choice is C.

Applying the Interest Allowance Method,compute Taylor and Timmy's Share of Net