Dividing Partnership Income Jennifer Wyatt and Megan Truett formed a partnership
ID: 2353748 • Letter: D
Question
Dividing Partnership IncomeJennifer Wyatt and Megan Truett formed a partnership, investing $330,000 and $110,000, respectively.
Determine their participation in the year's net income of $420,000 under each of the following independent assumptions:
No agreement concerning division of net income.
Divided in the ratio of original capital investment.
Interest at the rate of 8% allowed on original investments and the remainder divided in the ratio of 2:3.
Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally.
Allowance of interest at the rate of 8% on original investments, salary allowances of $50,000 and $70,000, respectively, and the remainder divided equally.
Wyatt Truett
(a) $ $
(b) $ $
(c) $ $
(d) $ $
(e) $ $
Explanation / Answer
Allowance of interest rate = 8% on investments For wyatt = 0.08*$330,000 = $26,400 For Truett = 0.08*$110,000 = $8,800 Total interst rate is = $26,400 + $8,800 = $35,200 Total salary allowance + interest is = $35,200+$120,000 = $155,200 Remaining net income = $420,000 - $155,200 = $384,800 Remaining net income is equally distributed. = $384,800/2 = 192,400 For Truett: For wyatt $192,400 $192,400 Not yet rated Anonymous - More than 1 day later 1. Wyatt: 210,000 Truett: 210,000 2. Wyatt: 420,000 X 3/4=315,000 Truett: 420,000 X 1/4=105,000 3. Wyatt: 330,000 X .08=26,400 Truett: 110,000 X .08=8,800 26400+8800=35200 35200-420000=384800 Wyatt: 384800 X 2/5=153920 Truett: 384800 X 3/5=230880 Wyatt: 153920+26400=180320 Truett: 230880+8800 = 239680 4. Wyatt: 50,000+150,000=200,000 Truett:70,000+150,000=220,000 5. Wyatt: 26400+50000+123400 = 208800 Truett: 8800+70000+132400 = 211200 For each part 1-5, the total must add to 420,000, which it does.