Question

Desmond Drury and Ty Wilkins have decided to form a partnership. They have agreed that Drury is to invest $30,600 and that Wilkins is to invest $45,900. Drury is to devote full time to the business, and Wilkins is to devote one-half time. The following plans for the division of income are being considered:

Equal division.

In the ratio of original investments.

In the ratio of time devoted to the business.

Interest of 10% on original investments and the remainder in the ratio of 3:2.

Interest of 10% on original investments, salary allowances of $52,000 to Drury and $26,000 to Wilkins, and the remainder equally.

Plan (e), except that Wilkins is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances.

Required:

For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $229,500 and (2) net income of $101,100.

	(1)				(2)
	$229,500				$101,100
Plan		Drury		Wilkins		Drury		Wilkins
a.	$		$		$		$
b.	$		$		$		$
c.	$		$		$		$
d.	$		$		$		$
e.	$		$		$		$
f.	$		$		$		$

Answer 1

The division of the net income under each of the following assumptions
	1				2
	$229,500				$101,100
Plan		Drury		Wilkins		Drury		Wilkins
a.	$114,750.00		$114,750.00		$50,550.00		$50,550.00
b.	$91,800.00		$137,700.00		$40,440.00		$60,660.00
c.	$153,000.00		$76,500.00		$67,400.00		$33,700.00
d.	$136,170.00		$93,330.00		$59,130.00		$41,970.00
e.	$126,985.00		$102,515.00		$62,785.00		$38,315.00
f.	$111,835.00		$117,665.00		$60,475.00		$40,625.00
Ratio of Original Investment = $30600 : $45900 = 2 : 3
Ratio of time devoted to the business = 2 : 1
For Plan e , net income in excess of total salary allowance = $229500 - $78000 = $151500 (1) and $101100 - $78000 = $23100