Question

if dividend is agreed to be made the allowance of interest at the rate of 8% and original investments, salary allowance of 30000$ and 24000$ respectively, and the remainder divided equally; determine the partnership in net income

Answer 1

Solution:

Let the initial investment of the two Partners be x and y respectively

So, allowance of interest will be:

Partner 1: $0.08x$

Partner 2 : $0.08y$

Total Allowance of Interest $=0.08x+0.08y$

Salaries are :

Partner 1: $30,000

Partner 2 : $24,000

Total Salaries $=$ $$54,000$

The remainder- Divided equally

Partner 1: R/2

Partner 2: R/2

Total Remaining $=$ $$R$

Therefore, the net income of partnership:

$Net$ $Income=Total$ $Allowance$ $of interest+ Salaries + R$

$Net$ $Income=0.08x+0.08y+54,000+R$

The Net income will be a function as shown above as the initial investments of the partners and the Amount divided equally( Remainder after Allowance of interest and Salaries) were not known