Apply the interest allowance method; each partner earns interest on their capital investment at a rate of 10%. Compute Julie and Jennifer's share of net income if Julie invested $52,000 and Jennifer invested $38,000. The remainder after distribution on interest on capital is to be divided equally. Net income was $12,000.
A) Julie $5,200; Jennifer $3,800
B) Julie $6,700; Jennifer $5,300
C) Julie $6,000; Jennifer $6,000
D) None of these answers is correct.

Question

Quizplus · Accepted Answer

Julie earns $5,200 (10% of $52,000) and Jennifer earns $3,800 (10% of $38,000) as interest. The total interest is $9,000, leaving $3,000 to be divided equally. Each gets $1,500 from the remainder, so Julie gets $6,700 and Jennifer gets $5,300.

Apply the Interest Allowance Method; Each Partner Earns Interest on Their