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19. Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at the beginning of the...

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Accounting

19.

Rodgers and Winter had capital balances of $60,000 and $90,000,respectively, at the beginning of the current fiscal year. Thearticles of partnership provide for salary allowances of $25,000and $30,000, respectively; an allowance of interest at 12% on thecapital balances at the beginning of the year; and the remainingnet income divided equally. Net income for the current year was$110,000.

a. Present the Division of net income sectionof the income statement for the current year.

Net income$110,000
RodgersWinterTotal
Division of net income:
Salary allowance$$$
Interest allowance
Total
Net income$$$

b. Assuming that the net income had been$65,000 instead of $110,000, present the Division of net incomesection of the income statement for the current year.

Net income$65,000
RodgersWinterTotal
Division of net income:
Salary allowance$$$
Interest allowance
    Total
Net income$$$

Answer & Explanation Solved by verified expert
4.4 Ratings (585 Votes)

Answer a.
Net Income    110,000.00
Rodgers Winter Total
Division of Net Income:
Salary Allowance    25,000.00    30,000.00      55,000.00
Interest Allowance      7,200.00    10,800.00      18,000.00
Remaining Income    18,500.00    18,500.00      37,000.00
Net Income    50,700.00    59,300.00    110,000.00
Answer b.
Net Income      65,000.00
Rodgers Winter Total
Division of Net Income:
Salary Allowance    25,000.00    30,000.00      55,000.00
Interest Allowance      7,200.00    10,800.00      18,000.00
Excess of Allowances Over Net Income    (4,000.00)    (4,000.00)      (8,000.00)
Net Income    28,200.00    36,800.00      65,000.00

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