Dividing Partnership Income Desmond Drury and Ty Wilkins have decided to form a
ID: 2417813 • 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 $69,300 and that Wilkins is to invest $161,700. 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 $157,000 to Drury and $78,500 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 $693,000 and (2) net income of $304,800.
(1) (2) $693,000 $304,800 Plan Drury Wilkins Drury Wilkins a. $ $ $ $ b. $ $ $ $ c. $ $ $ $ d. $ $ $ $ e. $ $ $ $ f. $ $ $ $Explanation / Answer
Division of net income is calculated as under:
(1) (2) $693,000 $304,800 Plan Particulars Drury Wilkins Total Drury Wilkins Total a. Equal division. $ 346,500 $ 346,500 693,000 $ 152,400 $ 152,400 304,800 b. In the ratio of original investments $ 207,900 $ 485,100 693,000 $ 91,440 $ 213,360 304,800 c. In the ratio of time devoted to the business. $ 462,000 $ 231,000 693,000 $ 203,200 $ 101,600 304,800 d. Interest of 10% on original investments and the remainder in the ratio of 3:2. $ 408,870 $ 284,130 693,000 $ 175,950 $ 128,850 304,800 e. Interest of 10% on original investments, salary allowances of $157,000 to Drury and $78,500 to Wilkins, and the remainder equally. $ 381,130 $ 311,870 693,000 $ 187,030 $ 117,770 304,800 f. 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. $ 335,380 $ 357,620 693,000 $ 180,100 $ 124,700 304,800