Question

PROBLEMThe PQ partnership has the following plan for the distribution of partnership net income (loss):P QSalaries $60,000 $100,000Bonus in net income 6% 12%Interest on average capital balances 7% 7%Remainder (if positive) 60% 40%Remainder (if negative) 50% 50% Required:Calculate the distribution of partnership net income (loss) for each independent situation below (for each situation, assume the average capital balance of P is $140,000 and of Q is $240,000).1. Partnership net income is $360,000.2. Partnership net income is $240,000.3. Partnership net loss is $40,000.

Answer 1

Answer:

1. P = $156,560; Q = $203,440

2. P = $90,320; Q = 149,680

3. P = -$43,500; Q = $3,500

Explanation:

The explanation is given in images for each situation:

Answer 2

The distribution of partnership net income will be $156560 and $203450 respectively.

How to calculate the partnership net income?

The partnership net income for P will be calculated thus:

Salary = $60000

Bonus in net income = $21600

Interest = $9800.

Remainder = $65160.

Total = $156560

The partnership net income for Q will be calculated thus:

Salary = $10000

Bonus in net income = $43200

Interest = $16800

Remainder = $43440

Total = $203440

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