MacDuff and MacBeth recently formed a partnership called Inverness Ltd. MacDuff

ID: 2357235 • Letter: M

Question

MacDuff and MacBeth recently formed a partnership called Inverness Ltd. MacDuff invested $30,000 cash, and MacBeth invested $30,000 of plant assets and $15,000 cash. The partners are trying to find an equitable way of splitting the income to take into account that MacBeth invested more capital, but MacDuff will spend twice as much time as MacBeth in running the business. They have asked you to develop a worksheet to allow them to see the effect of: - various interest rates on invested capital - various salary allowances for time spent - various levels of partnership net income The easiest way to achieve this flexibility is to use a Data Section. Use the following information as input for your model: Net Income - 125,000 Division of net income: Interst on orginial investment at - 15% Salary allowances: MacDuff - 50,000 MacBeth - 25,000 Remainder shared equally Check figure: MacDuff's share of income is $73,875

Explanation / Answer

Net Income - 125,000

Division of net income:

Interst on orginial investment at - 15%

Salary allowances: MacDuff - 50,000

MacBeth - 25,000

Remainder shared equally Check figure:

MacDuff's share of income is $73,875

NET IN COME

75 000

DIVISION

INTEREST ON ORGINAL INVESTMENT

10%

mACDUFF

60 000

MACBERTH

30 000

MACBERTH SHARE OF INCOME

51 750