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Question

2] Onlin/X ( G, No agreement concem× irn takeAssignment takeAssignmentMando? nvoker-assignments takeAssignmentSessionLocatoreass. eBook Show Me How Calculator Morrison and Greene have decided to form a partnership. They have agreed that Morrison is to invest $150,000 and that Greene is to invest $50,000. Morrison is to devote one-half time to the business, and Greene is to devote full time. The following plans for the division of income are being considered: a. Equal division. b. In the ratio of original investments c. In the ratio of time devoted to the business d. Interest of 6% on original investments and the remainder equally e. Interest of 6% on original investments, salary allowances of $40,000 to Morrison and S 70,000 to Greene, and the remainder equally Plan (e), except that Greene is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances Required: For each plan, determine the division of the net income under each of the following assumptions: (1) net income of s 115,000 and (2) net income of $200,000. Round answers to the nearest whole dollar. $115,000 $200,000 Plan Morrisorn Greene Morrisorn Greene 57,500 100,000100,000 b. d. Check My Work Previous Next All work saved.

Explanation / Answer

(1) (2) $ 1,15,000 $ 2,00,000 Plan Morrison Greene Morrison Greene a. Equal Division $                                            57,500 $                                  57,500 $                           1,00,000 $                                 1,00,000 ( $ 1,15,000 X 0.5) ( $ 1,15,000 X 0.5) ( $ 2,00,000 X 0.5) ( $ 2,00,000X 0.5) b. In the ratio of Original Investments $                                            86,250 $                                  28,750 $                           1,50,000 $                                     50,000 [ $ 1,15,000 X(1.5/2)] [ $ 1,15,000 X(0.5/2)] [ $ 2,00,000 X(1.5/2)] [ $ 2,00,000 X(0.5/2)] c. In the ratio of Time devoted to business $                                            38,333 $                                  76,667 $                              66,667 $                                 1,33,333 [ $ 1,15,000 X(0.5/1.5)] [ $ 1,15,000 X(1/1.5)] [ $ 2,00,000 X(0.5/1.5)] [ $ 2,00,000 X(1/1.5)] d. Interest of 6 % on Original Investment and remainder equally $                                            60,500 $                                  54,500 $                           1,03,000 $                                     97,000 $ 1,50,000 X 6% = $ 9,000 $ 50,000 X 6% = $ 3,000 $ 1,50,000 X 6% = $ 9,000 $ 50,000 X 6% = $ 3,000 Remainder after paying Interest = ( $ 1,15,000 - $ 9,000 - $ 3,000) = $ 1,03,000 ( which is to be distributed equally) Remainder after paying Interest = ( $ 2,00,000 - $ 9,000 - $ 3,000) = $ 1,88,000 ( which is to be distributed equally) .= ($ 1,03,000/2) + $ 9,000 = $ 60,500 .= ($ 1,03,000/2) + $ 3,000 = $ 54,500 .= ($ 1,88,000/2) + $ 9,000 = $ 1,03,000 .= ($ 1,88,000/2) + $ 3,000 = $ 97,000 e. Interest of 6 % on Original Investment and Salary allowance of $ 40,000 to Morrison and $ 70,000 to Greene remainder equally $                                            45,500 $                                  69,500 $                              88,000 $                                 1,12,000 $ 1,50,000 X 6% = $ 9,000 $ 50,000 X 6% = $ 3,000 $ 1,50,000 X 6% = $ 9,000 $ 50,000 X 6% = $ 3,000 Salary allowance = $ 40,000 Salary allowance = $ 70,000 Salary allowance = $ 40,000 Salary allowance = $ 70,000 Remainder after paying Interest & Salary = ( $ 1,15,000 - $ 9,000 - $ 3,000-$ 40,000-$70,000) = $ 7,000 loss ( which is to be distributed equally) Remainder after paying Interest & Salary = ( $ 2,00,000 - $ 9,000 - $ 3,000-$ 40,000-$70,000) = $ 78,000 ( which is to be distributed equally) .= ($ -7,000/2) + $ 9,000 + $ 40,000 = $ 45,500 .= ($ -7,000/2) + $ 3,000 + $ 70,000 = $ 69,500 .= ($ 78,000/2) + $ 9,000 + $ 40,000= $ 88,000 .= ($ 78,000/2) + $ 3,000 + $ 70,000= $ 1,12,000 f. Plan e. Except Bonus to Greene 20% of the amount by which net income exceeds the total salary allowance $                                            41,000 $                                  74,000 $                              75,000 $                                 1,25,000 $ 1,50,000 X 6% = $ 9,000 $ 50,000 X 6% = $ 3,000 $ 1,50,000 X 6% = $ 9,000 $ 50,000 X 6% = $ 3,000 Salary allowance = $ 40,000 Salary allowance = $ 70,000 Salary allowance = $ 40,000 Salary allowance = $ 70,000 Bonus = ($ 1,15,000 -$ 70,000) X 20 % = $ 9,000 Bonus = ($ 2,00,000 -$ 70,000) X 20 % = $ 26,000 Remainder after paying Interest & Salary & Bonus = ( $ 1,15,000 - $ 9,000 - $ 3,000-$ 40,000-$70,000- $ 9,000) = $ 16,000 loss ( which is to be distributed equally) Remainder after paying Interest & Salary & Bonus = ( $ 2,00,000 - $ 9,000 - $ 3,000-$ 40,000-$70,000 - $ 26,000) = $ 52,000 ( which is to be distributed equally) .= ($ -16,000/2) + $ 9,000 + $ 40,000 = $ 41,000 .= ($ -16,000/2) + $ 3,000 + $ 70,000 + $ 9,000 = $ 74,000 .= ($ 52,000/2) + $ 9,000 + $ 40,000= $ 75,000 .= ($ 52,000/2) + $ 3,000 + $ 70,000 + $ 26,000= $ 1,25,000

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