Question

low HOW Calculator Print Item Dividing Partnership Income Tyler Hawes and Piper Albright formed a partnership, investing $180,000 and $60,000, respectively. Determine their participation in the year's net income of $270,000 under each of the following independent assumptions: a. No agreement concerning division of net income. b. Divided in the ratio of original capital investment. C. Interest at the rate of 5% allowed on original investments and the remainder divided in the ratio of 2:3. d. Salary allowances of $36,000 and $48,000, respectively, and the balance divided equally. e. Allowance of interest at the rate of 5% on original Investments, salary allowances of $36,000 and $48,000, respectively, and the remainder divided eg Hawes Albright

Answer 1

1.

Assumption		Hawes	Albright
a	Total participation in net income	135000	135,000
		[270000*1/2]	[270000*1/2]
b	Total participation in net income	202500	67500
		[270000*18/(18+6)]	[270000*6/(18+6)]
c	Interest paid	9000	3000
	Balance of [270,000 -(9000+3000)] in the ratio of 2:3	103200	154800
	Total participation in net income	112200	157800
d	Salary	36,000	48,000
	Remainder of [ 270,000 -(36,000+48,000) in the ratio of 1:1]	93000	93000
	Total participation in net income	129,000	141,000
e	Interest	9000	3000
	Salary	36,000	48,000
	Remainder of [ 270,000 -(36,000+48,000) - (9000+3000) in the ratio of 1:1]	87000	87000
	Total participation in net income	132000	138000

2. Share of income for Farley = 45,000 *3/4 = 33750

Share income for Ashley = 45,000 * 1/4 = 11250