Jennifer Wyatt and Megan Truett formed a partnership, investing $330,000 and $11

Question

Jennifer Wyatt and Megan Truett formed a partnership, investing $330,000 and $110,000, respectively.
Determine their participation in the year's net income of $420,000 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 8% 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 8% on original investments, salary allowances of $50,000 and $70,000, respectively, and the remainder divided equally.

Explanation / Answer

No agreement concerning division of net income. Net income should be shared equally. $80,000 each Divided in the ratio of original capital investment. 330,000 / 440,000 x 160,000 = $120,000 Wyatt 110,000 / 440,000 x 160,000 = $40,000 Truett Interest at the rate of 8% allowed on original investments and the remainder divided in the ratio of 2:3. 330,000 x 8% = $26,400 interest for Wyatt 110,000 x 8% = $8,800 interest for Truett 160,000 - 35,200 = 124,800 remaining 124,800 x 2/5 = $49,920 for Wyatt 124,800 x 3/5 = 74,880 for Truett 26,400 + 49,920 = $76,320 total for Wyatt 8,800 + 74,880 = $83,680 total for Truett Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally. 160,000 - 120,000 = 40,000 remaining after salaries 50,000 + 20,000 = $70,000 Wyatt 70,000 + 20,000 = $90,000 Truett Allowance of interest at the rate of 8% on original investments, salary allowances of $50,000 and $70,000, respectively, and the remainder divided equally. 330,000 x 8% = $26,400 interest for Wyatt 110,000 x 8% = $8,800 interest for Truett 124,800 - 120,000 = 4,800 remaining after interest and salaries 26,400 + 50,000 + 2,400 = $78,800 Wyatt 8,800 + 70,000 + 2,400 = $81,200 Truett

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