Christie and Jergens formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Christie to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Christie and Jergens's respective shares are:

Question

Quizplus · Accepted Answer

Christie's salary is $60,000. Interest allowance for Christie is $30,000 (10% of $300,000) and for Jergens is $40,000 (10% of $400,000). Total allocations before dividing the remaining income: $60,000 + $30,000 + $40,000 = $130,000. Remaining income to be divided equally: $135,000 - $130,000 = $5,000. Each partner gets $2,500 from the remaining income. Christie's total share: $60,000 + $30,000 + $2,500 = $92,500. Jergens's total share: $40,000 + $2,500 = $42,500.

Christie and Jergens Formed a Partnership with Capital Contributions of $300,000