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Dividing Partnership Income Dylan Howell and Demond Nickles have decided to form a partnership. They have...

Dividing Partnership Income

Dylan Howell and Demond Nickles have decided to form a partnership. They have agreed that Howell is to invest $50,000 and that Nickles is to invest $75,000. Howell is to devote full time to the business, and Nickles is to devote one-half time.

1.

a. How do partners share profits? Assume the following (1)net income of $420,000 and (2) net income of $150,000 .

Solve for both (1) and (2) with the following plan for the division of income : Interest of 10% on original investments, salary allowances of $38,000 to Howell and $19,000 to Nickles, and the remainder equally. Show your work and discuss your results.

b. Also how much tax does the partnership owe the IRS for the income earned? Explain.

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