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 :-
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
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