Candace Hassell and Abby Lawson formed a partnership, investing $144,000 and $96
ID: 2476875 • Letter: C
Question
Candace Hassell and Abby Lawson formed a partnership, investing $144,000 and $96,000, respectively. Determine their participation in the year's net income of $396,000 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 12% allowed on original investments and the remainder divided in the ratio of 2:3. d.Salary allowances of $38,000 and $52,000, respectively, and the balance divided equally. e.Allowance of interest at the rate of 12% on original investments, salary allowances of $38,000 and $52,000, respectively, and the remainder divided equally.
Explanation / Answer
If there is no agreement then net income is divided equally through partners
Candace Hassell $ 198,000
Abby Lawson $ 198000
Divided net profit in the ratio of capital sharing ratio i.e. 144:96
Candace Hassell (396000*144/240) 237600
Abby Lawson (396000*96/240) 158400
Interest on Capital
Candace Hassell (144000*12/100) 17280
Abby Lawson (96000*12/100) 11520
Remaining net profit (396000-17280-11520) 367200
Remaining net profit is to be share in the ratio of 2:3
Candace Hassell (367200*2/5) 146880
Abby Lawson (367200*3/5) 220320
Salary ( 38,000 + 52,000) $ 90000
Remaining net profit $ 306000
Candace Hassell (306000/2) 103000
Abby Lawson (306000/2) 103000
Net Income 396000
Interest on Capital
Candace Hassell (144000*12/100) 17280
Abby Lawson (96000*12/100) 11520
Salary 90000
Remaining net profit (396000-17280-11520-90000) 277200
Remaining net profit is to be share equally
Candace Hassell (277200/2) 138600
Abby Lawson (277200/2) 138600
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