Question

Dividing Partnership Income

Candace Hassell and Abby Lawson formed a partnership, investing $387,000 and $129,000, respectively.

Determine their participation in the year's net income of $354,000 under each of the following independent assumptions:

A) Salary allowances of $81,000 and $111,000, respectively, and the balance divided equally.

B) Allowance of interest at the rate of 18% on original investments, salary allowances of $81,000 and $111,000, respectively, and the remainder divided equally.

Hassell Lawson

A = _________ ________

B = _________ ________

Answer 1

	Hassell	Lawson
A	162000	192000
B	185220	168780
Workings:
A
	Hassell	Lawson
Salary allowances	81000	111000
Remaining income	81000	81000
Net income	162000	192000
Remaining income = 354000-(81000+111000) = $162000
Remaining income distribution = 162000/2 = $81000
B
	Hassell	Lawson
Salary allowances	81000	111000
Interest	69660	23220
Remaining income	34560	34560
Net income	185220	168780
Interest :
Hassell=387000*18%=69660
Lawson=129000*18%=23220
Remaining income = 354000-(81000+111000+69660+23220) = $69120
Remaining income distribution = 69120/2 = $34560