interest of 10 on original investments and the remainder in the ratio of 3 2 554353

PR 12-2B Dividing partnership income

Tim Snyder and Jay Wise have decided to form a partnership. They have agreed that Snyder is to invest $30,000 and that Wise is to invest $40,000. Snyder is to devote full time to the business, and Wise is to devote one-half 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 10% on original investments and the remainder in the ratio of 3:2.

e. Interest of 10% on original investments, salary allowances of $34,000 to Snyder and $17,000 to Wise, and the remainder equally.

f. Plan (e), except that Snyder is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances.

Instructions

For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $210,000 and (2) net income of $84,000. Present the data in tabular form, using the following columnar headings: