Candace Hassell and Abby Lawson formed a partnership, investing $280,000 and $14

Question

Candace Hassell and Abby Lawson formed a partnership, investing $280,000 and $140,000, respectively. Determine their participation in the year's net income of $264,000 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 15% allowed on original investments and the remainder divided in the ratio of 2:3. d.) Salary allowances of $66,000 and $90,000, respectively, and the balance divided equally.e.) Allowance of interest at the rate of 15% on original investments, salary allowances of $66,000 and $90,000, respectively, and the remainder divided equally.

Explanation / Answer

The Net Income = $ 264,000

a) No agreement concerning division of net Income,then Net Income divide equally that is $ 132,000 and $ 132,000

b) Divide in the ratio of Original Capital Investment that is 2:1, then Net Income divide $ 176,000 and $ 88,000

c) Total Interest on Capital = (280000+140000)*15% = $ 63,000

The Net Income after Interst = 264000 - 63000 = $ 201,000 divide in the ration 2:3 then $ 80,400 and $ 120,600

d) Net Income after Salary allowances = 264000 - 66000 - 90000 = $ 108,000 divide in th ratio equally, the each one receive $ 54,000 each.

e) Net Income after Interest and salary allowances = 264000 - 63000 - 66000 - 90000 = 45,000

The Balance amount $ 45,000 divide equally, then Each partner received $ 22,500.

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