Questions: Ramer and Knox began a partnership by investing 60,000 and 90,000, respectively. The partners agreed to share net income and loss by giving annual salary allowances of 50,000 to Ramer and 40,000 to Knox, 10% interest allowances on their investments, and any remaining balance shared equally. Note: Enter all allowances as positive values. Enter losses as negative values. Required: 1. Determine each partner's share given a first-year net income of 98,800. 2. Determine each partner's share given a first-year net loss of 16,800.

Ramer and Knox began a partnership by investing 60,000 and 90,000, respectively. The partners agreed to share net income and loss by giving annual salary allowances of 50,000 to Ramer and 40,000 to Knox, 10% interest allowances on their investments, and any remaining balance shared equally.
Note: Enter all allowances as positive values. Enter losses as negative values.
Required:
1. Determine each partner's share given a first-year net income of 98,800.
2. Determine each partner's share given a first-year net loss of 16,800.

Transcript text: Ramer and Knox began a partnership by investing $\$ 60,000$ and $\$ 90,000$, respectively. The partners agreed to share net income and loss by giving annual salary allowances of $\$ 50,000$ to Ramer and $\$ 40,000$ to $\mathrm{Knox}, 10 \%$ interest allowances on their investments, and any remaining balance shared equally. Note: Enter all allowances as positive values. Enter losses as negative values. Required: 1. Determine each partner's share given a first-year net income of $\$ 98,800$. 2. Determine each partner's share given a first-year net loss of $\$ 16,800$. Determine each partner's share given a first-year net loss of $\$ 16,800$.

Solution

Solution Steps

To determine each partner's share given a first-year net loss of $16,800, we need to follow these steps:

Calculate the salary allowances for both partners.
Calculate the interest allowances based on their initial investments.
Subtract the total allowances from the net loss to find the remaining balance.
Allocate the remaining balance equally between the partners.
Sum up the salary, interest, and remaining balance allocations to find each partner's final share.

Step 1: Calculate Salary Allowances

The salary allowances for Ramer and Knox are given as: \[ \text{Ramer's Salary Allowance} = \$50,000 \] \[ \text{Knox's Salary Allowance} = \$40,000 \]

Step 2: Calculate Interest Allowances

The interest allowances are 10% of their initial investments: \[ \text{Ramer's Interest Allowance} = 0.10 \times 60,000 = \$6,000 \] \[ \text{Knox's Interest Allowance} = 0.10 \times 90,000 = \$9,000 \]

Step 3: Calculate Total Allowances

The total allowances are the sum of the salary and interest allowances: \[ \text{Total Allowances} = 50,000 + 40,000 + 6,000 + 9,000 = \$105,000 \]

Step 4: Calculate Remaining Balance

The net loss is given as $-\$16,800$. Subtract the total allowances from the net loss to find the remaining balance: \[ \text{Remaining Balance} = -16,800 - 105,000 = -\$121,800 \]

Step 5: Allocate Remaining Balance Equally

The remaining balance is allocated equally between the partners: \[ \text{Balance per Partner} = \frac{-121,800}{2} = -\$60,900 \]

Step 6: Calculate Final Shares

The final share for each partner is the sum of their salary allowance, interest allowance, and their share of the remaining balance: \[ \text{Ramer's Share} = 50,000 + 6,000 + (-60,900) = -\$4,900 \] \[ \text{Knox's Share} = 40,000 + 9,000 + (-60,900) = -\$11,900 \]