Candace Hassell and Abby Lawson formed a partnership, investing $424,000 and $21
ID: 2441826 • Letter: C
Question
Candace Hassell and Abby Lawson formed a partnership, investing $424,000 and $212,000, respectively.Independent assumptions:
(a) no agreement concerning division of net income;
(b) divided in the ratio of original capital investment;
(c) interest at the rate of 12% allowed on original investments and the remainder divided in the ratio of 2:3;
(d) salary allowances of $101,000 and $139,000, respectively, and the balance divided equally;
(e) allowance of interest at the rate of 12% on original investments, salary allowances of $101,000 and $139,000, respectively, and the remainder divided equally.
Determine Hassell's and Lawson's participation in the year's net income of $288,000 under each of the independent assumptions above.
Hassell Lawson
(a) $ Incorrect. The correct answer is 144,000.X $ Incorrect. The correct answer is 144,000.X
(b) $ $
(c) $ $ Incorrect. The correct answer is 152,448.X
(d) $ $
(e) $ $ Incorrect. The correct answer is 150,280.X
Explanation / Answer
Given Investment amounts of Hassell and Lawson $424,000 $212,000 the capital ratio is 2:01 a) no agreement concerning division of net income: In the absence of prior agreement ,generally provide for an equal split among the partners. The net income given $288,000 The income to be divided in the equal ra de in the ratio of equal tio of equal Hassell's Share of income = $144,000 Lawson's Share of income = $144,000 b) divide in the ratio of original capital investment: 2:01 2/3 : 1/3 Hassell's Share of income = $192,000 Lawson's Share of income = $96,000 c)Interest at the rate of 12% allowed on original investments Interest on Hassell's Investment ($424,000x12%) = 50,880 Lawson's investment ($212,000x12%) = 25,440 The remainder amount (288,000 - (50,880+25,440) The remainder amount = 211,680 Hassell's Share = 2:3 Hassell's Share = hare= 211,680 x 2/5 = 84,672 Lawson's Share = 211,680x3/5 = 1,27,008 211,680x3/5= 127,008 d) Salary allowances of $101,00 and $139,000 respectively the remainder amount =(288,000 - (101,000 + 139,000) The remainder amount = 48,000 Hassell's Share = 24,000 e) allowance of interest at the rate of 12% on original investments, salary allowances of $101,000 and $139,000 0 res[ectively and the remainder divided equally. Hassel's interest on investment and salary = 50,880 +101,000 = 151,880 Lawson's = 25,440 + 139,000= 164,440 Remainder Amount = $288,000-(151,880+164,440) -28,320 Hassell's Share = -14,160 Lawson's Share = -14,160