Question

Mo, Lu, and Barb formed the MLB Partnership by making investments of $81,000, $315,000, and $504,000, respectively. They predict annual partnership net income of $529,500 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $86,000 to Mo, $64,500 to Lu, and $97,500 to Barb; interest allowances of 10% on their initial capital investments; and the remaining balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb.

Answer 1

	MLB Partnership	Total	MO	LU	BARB
	Investments	900000	81000	315000	504000
	Ratio	1.00	0.09	0.35	0.56
a)	Profit Allocation Equally	529500	176500	176500	176500
b)	In the ratio of Investment	529500	47655	185325	296520
c)	Salary	248000	86000	64500	97500
	Interest 10% on initial Investments	90000	8100	31500	50400
	Remaining balance @20%, 40% & 40% respect.	191500	38300	76600	76600
	(529500-248000-90000)
	Total of ( c )	529500	132400	172600	224500