The srt partnership agreement specifies that partnership net income be allocated as follows:
partner s partner r partner t
salary allowance $20,000 $25,000 $15,000
interest on average capital balance 10% 10% 10%
remainder 30% 30% 40%
average capital balances for the current year were $60,000 for s, $50,000 for r, and $40,000 for t.
refer to the information given. assuming a current year net income of $45,000, what amount should be allocated to each partner?
partner s partner r partner t
a. $17,000 $21,000 $7,000
b. ($9,000) ($9,000) ($12,000)
c. $13,500 $13,500 $18,000
d. $22,500 $22,500 $0

A. $17,000 $21,000 $7,000

Explanation:

From the income, we will subtract the salaries and interest, this will give us the amount to distribute among the partner

net income            45,000

salaries                 (60,000)  (20,000 + 25,000 + 15,000)

interest                 (15, 000)  (60,000 + 50,000 + 40,000) x 10%

net loss                (30,000)

Each partner will receive his salary and capital interest, and proportion of the remainder

Allocate to S

20,000 + 6,000 - 9,000 = 17,000

Allocate to R

25,000 + 5,000 - 9,000 = 21,000

Allocate to T

15,000 + 4,000 - 12,000 =   7,000

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c.

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