Applying the Interest Allowance Method, Compute Taylor and Timmy's Share

question 129

Multiple Choice

Applying the interest allowance method, compute Taylor and Timmy's share of net income if Taylor invested $370,000 and Timmy invested $780,000 at a 6% interest rate, for each partner with the remainder to be divided equally. Net income was $90,000.

• A) Taylor, $28,957; Timmy, $61,043
• B) Taylor, $45,000; Timmy, $45,000
• C) Taylor, $32,700; Timmy, $57,300
• D) None of these answers is correct.

---

Definitions:

Alignment

The process of adjusting various elements or strategies within an organization so that they are coordinated and support the overall objectives.

Participative Decision Making

A leadership style where employees at all levels are encouraged to contribute ideas and opinions towards making decisions that affect their work and the organization.

Emotional Support

Emotional support entails offering empathy, concern, encouragement, and love to someone, helping them cope with stress and emotional challenges.

Higher Purpose

A guiding or overarching goal that transcends individual desires or ambitions, often related to altruism or contribution to a larger cause.