Dean and Jerry formed a partnership, agreeing to share profits and losses equally. Dean will receive a guaranteed payment of $48,000 per year. The partnership has $240,000 net income from operations for the year, before considering the guaranteed payment. What is Dean's share of the partnership ordinary income and fuaranteed payment?
To determine Dean's share of the partnership ordinary income and guaranteed payment, we first need to calculate the total income available for distribution.
The net income from operations before considering the guaranteed payment is $240,000.
Since Dean has a guaranteed payment of $48,000 per year, we subtract this amount from the net income to calculate the remaining income available for distribution among the partners:
$240,000 - $48,000 = $192,000
Now, we can determine the share of the remaining income that Dean is entitled to. In a partnership where profits and losses are shared equally, each partner receives an equal share.
Since there are two partners (Dean and Jerry), Dean's share of the remaining income will be:
$192,000 / 2 = $96,000
Therefore, Dean's share of the partnership ordinary income is $96,000, and his guaranteed payment is $48,000.