Hope & Faith Company reports net income of $40,000.

The partnership agreement provides for annual salaries of $24,000 for Hope and $15,000 for Faith.

Interest allowances of $4,000 and $6,000, respectively.

Any remaining is to be shared 70% and 30%, respectively.

Instructions: Prepare in proper format the amount of net income distributed to each partner.

The computation of net income distributed to each partner is given below:-

Hope Faith Total

Annual Salary $24,000 $15,000 $39,000

Interest allowance $4,000 $6,000 $10,000

Total salary and interest $28,000 $21,000 $49,000

Remaining deficiency ($9,000)

($49,000 - $40,000)

Hope ($9,000 * 70%) ($6,300)

Faith ($9,000 * 30%) ($2,700) ($9,000)

Total division net income $21,700 $18,300 $40,000