Applying the interest allowance method, compute Julie's and Jennifer's share of net income if Julie invested $40,000.and Jennifer invested $24,000. At an 8% interest rate, with the remainder to be decided equally. Net income was $10,000.
To compute Julie's and Jennifer's share of net income using the interest allowance method, we need to follow these steps:
Step 1: Calculate interest on investments.
- Julie's investment: $40,000 * 8% = $3,200
- Jennifer's investment: $24,000 * 8% = $1,920
Step 2: Determine the remaining income after interest.
- Total interest: $3,200 + $1,920 = $5,120
- Remaining income: Net income - Total Interest = $10,000 - $5,120 = $4,880
Step 3: Allocate the remaining income equally between Julie and Jennifer.
- The remaining income is to be divided equally, as stated in the problem. Since there are two individuals, Julie and Jennifer, each one receives half.
- Julie's share: $4,880 / 2 = $2,440
- Jennifer's share: $4,880 / 2 = $2,440
Therefore, Julie's share of the net income is $2,440, and Jennifer's share of the net income is also $2,440.
Applying the interest allowance method, compute Julie and Jennifer’s share of net income if Julie invested $40,000 and Jennifer invested $24,000 at an 8% interest rate, with the remainder to be divided equally. Net income was $10,000.
A. Julie $3,200; Jennifer $1,920
B. Julie $6,250; Jennifer $3,750
C. Julie $5,640; Jennifer $4,360
D. none of the above