Tyler Hawes and Piper Albright formed a partnership, investing $360,000 and $180

Question

Tyler Hawes and Piper Albright formed a partnership, investing $360,000 and $180,000, respectively. Determine their participation in the year's net income of $240,000 under each of the following independent assumptions: a. No agreement concerning division of net income. b. Divided in the ratio of original capital investment. c. Interest at the rate of 10% allowed on original investments and the remainder divided in the ratio of 2:3. d. Salary allowances of $86,000 and $118,000, respectively, and the balance divided equally. e. Allowance of interest at the rate of 10% on original investments, salary allowances of $86,0 and S11B O respective and the rema naera vided equally Hawes Albright

Explanation / Answer

Allocation of Income among partners Case-a: HAWES ALBRIGHT Net income Net income 240000 To be shares equally 120000 120000 -240000 Share f income 120000 120000 0 Case-b HAWES ALBRIGHT Net income Net income 240000 To be shares in capital ratio i.e.2:1 160000 80000 -240000 Share f income 160000 80000 0 Case-c HAWES ALBRIGHT Net income Net income 240000 Interest on capital alowd at 10% 36000 18000 -54000 Remaining income 186000 Shares in ratio of 2:3 74400 111600 -186000 Share of Income 110400 129600 0 Case-d HAWES ALBRIGHT Net income Net income 240000 Salary 86000 118000 204000 Remaining income 36000 Shares in ratio of 1:1 18000 18000 -36000 Share of Income 104000 136000 0 Case-e HAWES ALBRIGHT Net income Net income 240000 Salary 86000 118000 204000 Remaining income 36000 Interest on capital 36000 18000 -54000 Remaining Loss -18000 Share of loss equally -9000 -9000 18000 Share of Income 113000 127000 0

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