Income distribution: Different arrangements. Frank, Gatti, and Hogan recently in

Question

Income distribution: Different arrangements. Frank, Gatti, and Hogan recently invested 530,000 each and formed the Apex partnership. During the First year of operation, the business generated a net income of $39,000. Determine the proper division of income among the partners for the following independent cases: Income is divided on the basis of a ratio of the beginning capital investments. Partners are allowed 12% interest on their investments; the remaining profits and losses are allocated on a 6 :1 :3 basis. Frank and Hogan each receive salary allowances of $24,000 per year; the remaining profits and losses are shared equally.

Explanation / Answer

a)both get a sum of half of the revenue i.e 39000/2=19500 USD b)12 % of 530000 = 63600 is interest of 1st year for both which is more than the revenue so there is a loss = 63600-39000 =24500 so loss share =-24600/2=-12300 USD c)total allowance of 1st year = 24000*2=48000 and the revenue in 1st year is 39000 so the loss is 9000 so each one shares loss of 4500 USD

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