Nguyen invested $100,000 and Hansen invested $200,000 in a partnership.They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Nguyen and a $40,000 per year salary allowance to Hansen,plus an interest allowance on the partners' beginning-year capital investments at 10%,with the balance to be shared equally.Under this agreement,the shares of the partners when the partnership earns a $105,000 in income are:
A)$52,500 to Nguyen; $52,500 to Hansen
B)$35,000 to Nguyen; $70,000 to Hansen
C)$57,500 to Nguyen; $47,500 to Hansen
D)$42,500 to Nguyen; $62,500 to Hansen
E)$70,000 to Nguyen; $60,000 to Hansen

Question

Quizplus · Accepted Answer

First, we need to calculate the interest allowance on their capital investments.

Nguyen's interest on $100,000 = $10,000
Hansen's interest on $200,000 = $20,000

Total interest allowance = $30,000

Next, we need to subtract the salary allowances from the total income:
$105,000 - $60,000 - $40,000 = $5,000

Then, we divide the remaining income equally between Nguyen and Hansen:
$5,000 / 2 = $2,500 each

Finally, we add the interest allowance to Nguyen and Hansen's shares:
Nguyen's total = $10,000 + $2,500 = $12,500
Hansen's total = $20,000 + $2,500 = $22,500

Therefore, the share of the partners when the partnership earns a $105,000 income are:
$57,500 to Nguyen; $47,500 to Hansen.

Nguyen Invested $100,000 and Hansen Invested $200,000 in a Partnership