Question

Dividing An unincorporated business form consisting of two or more persons conducting business as co-owners for profit.Partnership Income

Tyler Hawes and Piper Albright formed a partnership, investing $187,200 and $124,800, respectively.

Determine their participation in the year's net income of $288,000 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 $50,000 and $70,000, respectively, and the balance divided equally.

Allowance of interest at the rate of 18% on original investments, salary allowances of $50,000 and $70,000, respectively, and the remainder divided equally.

	Hawes	Albright
(a)	$	$
(b)	$	$
(c)	$	$
(d)	$	$
(e)	$	$

Answer 1

Answer :-  

Particulars	Hawes	Albrlght
Salary Allowance	$50000	$70000
Add : Interest (Capital * 18%)	$33696	$22464
Total Amount (A)	$83696	$92464
Add: Net Income ($111840 * Capital Ratio) (B)	$67104	$44736
Net Income Distributed (A + B)	$150800	$137200

Working Note :- Net Income :-

= $288000 - ($83696 + $92464)

= $288000 - $176160

= $111840

Net Income Distribution Ratio (Capital Ratio) :-

Hawes = $187200 / ($187200+$124800) = 0.6

Albrlght = $124800 / ($187200+$124800) = 0.4