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PE 12-2A Dividing partnership net income
Cody Paulson and Hannah Oâ€™Brien formed a partnership, dividing income as follows:
1. Annual salary allowance to Paulson of $26,000.
2. Interest of 5% on each partnerâ€™s capital balance on January 1.
3. Any remaining net income divided to Paulson and Oâ€™Brien, 2:1.
Paulson and Oâ€™Brien had $50,000 and $120,000, respectively, in their January 1 capital balances. Net income for the year was $33,000.
How much net income should be distributed to Paulson?