90.2K

Verified Solution

Link Copied!

Dividing Partnership Income

Morrison and Greene have decided to form a partnership. They have agreed that Morrison is to invest $201,000 and that Greene is to invest $67,000. 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:

1. Equal division.
2. In the ratio of original investments.
3. In the ratio of time devoted to the business.
4. Interest of 5% on original investments and the remainder equally
5. Interest of 5% on original investments, salary allowances of $60,000 to Morrison and $75,000 to Greene, and the remainder equally
6. 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 $163,000 and (2) net income of $260,000. Round answers to the nearest whole dollar.

	(1)				(2)
	$163,000				$260,000
Plan		Morrison		Greene		Morrison		Greene
a.		$81,500		$81,500		$130,000		$130,000
b.		$122,250		$40,750		$195,000		$65,000
c.		$54,333		$108,667		$86,667		$173,333
d.		$84,850		$78,150		$133,350		$126,650
e.		$77,350		$85,650		$125,850		$134150
f.		$		$		$		$

Answer & Explanation Solved by verified expert

See Answer