Candace Hassell and Abby Lawson formed a partnership, investing $360,000 and $18
ID: 2499207 • Letter: C
Question
Candace Hassell and Abby Lawson formed a partnership, investing $360,000 and $180,000, respectively.
Determine their participation in the year's net income of $408,000 under each of the following independent assumptions:
No agreement concerning division of net income.
Divided in the ratio of original capital investment.
Interest at the rate of 18% allowed on original investments and the remainder divided in the ratio of 2:3.
Salary allowances of $86,000 and $118,000, respectively, and the balance divided equally.
Allowance of interest at the rate of 18% on original investments, salary allowances of $86,000 and $118,000, respectively, and the remainder divided equally.
Explanation / Answer
Solution :
Hassell
Abby
total
1
No agreement concerning division of net income. (1:1) (408000/2)
204000
204000
408000
2
Divided in the ratio of original capital investment. (36:18)
272000
136000
408000
(408000*36/54)
(408000*18/54)
3
Interest at the rate of 18% allowed on original investments and the remainder divided in the ratio of 2:3.
net income
408000
Less interest at 18% (360000*.18),(180000*.18)
64800
32400
97200
Profit after interet(2:3)
124320
186480
310800
(310800*2/5)
(310800*3/5)
4
Salary allowances of $86,000 and $118,000, respectively, and the balance divided equally.
net income
408000
less salary allowance
86000
118000
204000
income after salary allowance (204000/2)
102000
102000
204000
5
Allowance of interest at the rate of 18% on original investments, salary allowances of $86,000 and $118,000, respectively, and the remainder divided equally.
net income
408000
Less interest at 18% (360000*.18),(180000*.18)
64800
32400
97200
Less salary allwance
86000
118000
204000
balance income (1:1) (106800/2)
53400
53400
106800
Hassell
Abby
total
1
No agreement concerning division of net income. (1:1) (408000/2)
204000
204000
408000
2
Divided in the ratio of original capital investment. (36:18)
272000
136000
408000
(408000*36/54)
(408000*18/54)
3
Interest at the rate of 18% allowed on original investments and the remainder divided in the ratio of 2:3.
net income
408000
Less interest at 18% (360000*.18),(180000*.18)
64800
32400
97200
Profit after interet(2:3)
124320
186480
310800
(310800*2/5)
(310800*3/5)
4
Salary allowances of $86,000 and $118,000, respectively, and the balance divided equally.
net income
408000
less salary allowance
86000
118000
204000
income after salary allowance (204000/2)
102000
102000
204000
5
Allowance of interest at the rate of 18% on original investments, salary allowances of $86,000 and $118,000, respectively, and the remainder divided equally.
net income
408000
Less interest at 18% (360000*.18),(180000*.18)
64800
32400
97200
Less salary allwance
86000
118000
204000
balance income (1:1) (106800/2)
53400
53400
106800
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