1. Garland and Driscoe have decided to form a partnership. They have agreed that
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Question
1. Garland and Driscoe have decided to form a partnership. They have agreed that Garland is to invest $200,000 and that Driscoe is to invest $100,000. Garland is to devote one-half time to the business and Driscoe is to devote full time. The following plans for the division of income are being considered:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
a. Equal division.
b. In the ratio of original investments.
c. In the ratio of time devoted to the business.
d. Interest of 12% on original investments and the remainder equally.
e. Interest of 12% on original investments, salary allowances of $30,000 to Garland and $60,000 to Driscoe, and the remainder equally.
f. Plan (e), except that Driscoe is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances.
For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $90,000 and (2) net income of $240,000. Present the data in tabular form, using the following columnar headings:
$90,000 $240,000
Plan Garland Driscoe Garland Driscoe
Explanation / Answer
a. 90000 240000
plan garland Driscoe garland Driscoe
a. 45000 45000 120000 120000
b. 60000 30000 160000 80000
c. 30000 60000 80000 160000
d. 51000 39000 126000 114000
e. 54000 72000 111000 129000
f. 54000 72000 111000 159000
note:
plan d= 200000*125=24000 +[90000-(12000+24000)]/2 =24000+27000=51000
driscoe=10000*12%=12000+27000=39000
plan e= 24000+30000=54000
driscoe=12000+6000=72000
plan f=240000-90000=150000*20%=30000
driscoe=129000+30000=159000
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