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    jahubb's Avatar
    jahubb Posts: 27, Reputation: 1
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    #1

    Jan 31, 2008, 02:16 PM
    Allcated income
    :eek: I'm so confused, someone please help!
    M and C are partners. At the beginning of the current year, M's capital account is $ 30,000
    An C's is $ 50,000. M and C decided to allocate income with 10% interest on capital balances at the beginning of the period and divide the balance equally. Net income for the current year is $ 80,000. Each partner withdrew $ 15,000 for personal use during the year. Determine the amount of income that will be allocated to each partner.
    A. M $30,000: C, $50,000
    B. M $32,000: C, $32,500
    C. M $35,000: C, $37,500
    D. M $39,000: C, $41,000
    Pleas tell me how to solve this problem, you don't have to give me the answer just explain how to figure it out, Thank You!!
    MaggieMouse's Avatar
    MaggieMouse Posts: 226, Reputation: 8
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    #2

    Feb 2, 2008, 10:53 AM
    This is to test you the difference between income and return of capital in a partnership. Partners withdraw cash for personal use is return of capital, has nothing to do with income allocation, therefore, don't do anything with it.

    Income is $80, M gets 10% of $30, C gets 10% of $50, that left $72, they split 50/50, each gets $36. Now add up for each, M-$36+$3, I guess you can figure out what C gets.
    jahubb's Avatar
    jahubb Posts: 27, Reputation: 1
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    #3

    Feb 2, 2008, 06:24 PM
    Maggie Mouse, Thank You!
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