Dividing Partnership Income Desmond Drury and Ty Wilkins have decided to form a
ID: 2417141 • Letter: D
Question
Dividing Partnership Income Desmond Drury and Ty Wilkins have decided to form a partnership. They have agreed that Drury is to invest $44,700 and that Wilkins is to invest $29,800. Drury is to devote full time to the business, and Wilkins is to devote one-half time. The following plans for the division of income are being considered: Equal division. In the ratio of original investments. In the ratio of time devoted to the business. Interest of 10% on original investments and the remainder in the ratio of 3:2. Interest of 10% on original investments, salary allowances of $50,600 to Drury and $25,300 to Wilkins, and the remainder equally. Plan (e), except that Wilkins 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 $223,500 and (2) net income of $98,400.
(1) (2)
$223,500 $98,400
Plan Drury Wilkins Drury Wilkins
a. $
$
$
$
b. $
$
$
$
c. $
$
$
$
d. $
$
$
$
e. $
$
$
$
f. $
$
$
$
Explanation / Answer
Ans) Desmond Drury Ty Wilkins Invest 44700 29800 Net Income 223500 Net Income 98400 (a) Equal Division Method Desmond Drury Ty Wilkins Total Net Income 134100 89400 223500 Net Income 59040 39360 98400 (b) In the Ratio of time devoted in business Desmond Drury Ty Wilkins Total Net Income 149000 74500 223500 Net Income 65600 32800 98400 Assume total time=1.5 © Interest of 10% of original investment and balance in the ratio of 3:2 Desmond Drury Ty Wilkins Total Net Income 134100 89400 223500 Net Income 59040 39360 98400 Interest 4470 2980 7450 Balance when net income $223500 216050 Balance when net income $98400 90950 (d) Interest of 10% of original investment and salary allowance $50600 to Desmond Drury and $25300 to Ty Wilkins and remainder equally Desmond Drury Ty Wilkins Total Net Income 125145 98355 223500 Net Income 62595 35805 98400 Interest 4470 2980 7450 Salary allowance 50600 25300 75900 Balance when net income $223500 140150 Balance when net income $98400 15050 (e) except that Wilkins is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances. Desmond Drury Total Net Income 110385 113115 223500 Interest 4470 2980 7450 Salary allowance 50600 25300 75900 Additional Bonus 29520 29520 Bonus 55315 55315 110630 Balance when net income $223500 110630 Desmond Drury Total Net Income 60345 38055 98400 Interest 4470 2980 7450 Salary allowance 50600 25300 75900 Additional Bonus 4500 4500 Bonus 5275 5275 10550 Balance when net income $98400 10550