jackson and campbell have capital balances of 100,000 and 300,000 respectively a

Question

jackson and campbell have capital balances of 100,000 and 300,000 respectively at the beginning of the current fiscal year. jackson devotes full time and campbell one-half time to the business. determine the division of 120,000 of net income under each of the following assumptions: (a) no agreement as to division of net income. (b) in ratio of capital balances (c) in ratio of time devoted to business (d) interest of 10% on capital balances and remainder equally. (e) interest of 10% on capital balances, salaries of 40,000 to jackson and 20,000 to campbell, and the remainder equally.

Explanation / Answer

a. 50:50 264000*.50 = 132000 each. b. 392/(392+196) = 2/3, 196/(392+196) = 1/3. (2/3)*264000 = 176000 c. Orig inv = 588000. Times 15% interest = 88200. 264000-88200 = 175800 to be divided 2/5, 3/5. 392000*.15 + 175800*.4 = 129120. 196000*.15 + 175800*.6 = 134880. d. 93000 + 129000 = 222000. 264000 - 222000 = 42000 to be divided 1/2, 1/2. 93000 + 21000 = 114000. 129000 + 21000 = 150000. e. 392000*.15 + 93000 = 151800. 196000*.15 + 129000 = 158400. 264000 - (151800 +158400) = -46200. There is nothing left to divide equally.

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