John and joe formed a partnership on january 2 2011 john, Ask an Expert

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John and Joe formed a partnership on January 2, 2011. John invested $100,000 in cash and Joe invested machinery valued at $40,000, which he had purchased for $60,000 in 2004. In addition John agreed to manage the firm full time and Joe agreed to work part time. They agreed that they would allocate income and loss using the following formula:
1. Interest - 6% on original capital investments
2. Salary-$6,000 a month to John and $3,000 a month to Joe
3. Bonus-John is to receive a bonus of 25% of net income after subtracting the bonus, interest and salary
4. Remaining profit is to be divided equally.

At the end of 2011 the partnership reported net income before interest, salaries and bonus of $142,000.

REQUIRED
Calculate the amount of bonus to be allocated to John.
Calculate the final net income.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9987161

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