Morrison and Amato have decided to form a partnership. They have agreed that Mor

Question

Morrison and Amato have decided to form a partnership. They have agreed that Morrison is to invest $150,000 and that Amato is to invest $50,000. Morrison is to devote one-half time to the business and Amato is to devote full time. The following plans for the division of income are being considered: Equal division. In the ratio of original investments. In the ratio of time devoted to the business. Interest of 12% on original investments and the remainder equally. Interest of 12% on original investments, salary allowances of $30,000 to Morrison and $64,000 to Amato, and the remainder equally. Plan (e), except that Amato is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances. -For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $105,000 and (2) net income of $180,000.

Explanation / Answer

Answer- 1) if net income of $105,000.

105000-30000-64000= 11000- (20% of 11000) ie 2200= 11000-2200= 8800-18000-6000= Nil

Morrison= 30000+18000= 48000

Amato= 64000+2200+6000= 72,200

2) If net income of $180,000.

180000-30000-64000=86000- (20% of 86000) ie 17,200= 86000-17200= 68800-18000-6000=44800

Morrison= 22400 Amato= 22400

Morrison=  30000+18000+22400= $70,400

Amato= 64000+17200+6000+22400=$109,600

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