Question

M. elston and r. ogle have partnership capital balances of $40,000 and $80,000, respectively. the partnership agreement indicates that net income or net loss should be shared equally. if net income for the partnership is $42,000, how should the net income be divided?

Answer 1

The net income should be divided $14,000 (1/3 * 42,000) to M.Elston and $28,000 (2/3 * 42,000) to R.Ogle if the total net income for the partnership is $42,000. Sharing the net income equally means that partners have to share the net income based on the ownership of the partnership. The ownerships can be determined by their capital portion in the partnership. M.Elston has 1/3 (40,000/(40,000+80,000))portion of the ownership and R.Ogle has 2/3 (80,000/(40,000+80,000))portion of the ownership.