(a) Discuss how partners can agree to share profits.

(b) Solve part (e) of problem 12-2B on page 624 ($420,000 only). Show work. Summarize results.

(c) What additional information would you need to know in order to calculate how much income tax the partnership would owe the IRS on the $420,000 profit earned in part (e) of problem 12-2B? Explain.

PR 12-2B Dividing partnership income Dylan Howell and Demond Nickles have decided to form a partnership. They have agreed that Howell is to invest $50,000 and that Nickles is to invest $75,000. Howell is to devote full time to the business, and Nickles is to devote one-half time. The following plans for OBJ. 2 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 $38,000 to Howell and $19,000 to Nickles, and the remainder equally. f. Plan (e), except that Howell 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 as- sumptions: (1) net income of $420,000 and (2) net income of $150,000. Present the data in tabular form, using the following columnar headings: $420,000 Howell Nickles $150,000 Howell Nickles Plan OBJ. 2, PR 12-3B Financial statements for partnerships