Dividing Partnership Income Brittany Taylor and Piper Albright formed a partners
ID: 2467700 • Letter: D
Question
Dividing Partnership Income Brittany Taylor and Piper Albright formed a partnership, investing $210,000 and $70,000, respectively. Determine their participation in the year's net income of $250,000 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 5% allowed on original investments and the remainder divided in the ratio of 2:3. Salary allowances of $30,000 and $40,000, respectively, and the balance divided equally. Allowance of interest at the rate of 5% on original investments, salary allowances of $30,000 and $40,000, respectively, and the remainder divided equally.
Explanation / Answer
1
Calculation of participation in the year's net income:
(In case of No agreement concerning division of net income)
Brittany Taylor
Piper Albright
Total
Net income Allocated (To be divided Equally)
$ 125,000.00
$ 125,000.00
$ 250,000.00
2
Calculation of participation in the year's net income:
(In case Divided in the ratio of original capital investment)
Brittany Taylor
Piper Albright
Total
Capital Investment
$ 210,000.00
$ 70,000.00
$ 280,000.00
Capital Investment ratio
0.75
0.25
(210000/280000)
(70000/280000)
Net income Allocated
$ 187,500.00
$ 62,500.00
$ 250,000.00
(250000*0.75)
(250000*0.25)
3
Calculation of participation in the year's net income:
(In case Interest at the rate of 5% allowed on original investments and the remainder divided in the ratio of 2:3)
Brittany Taylor
Piper Albright
Total
Original Investment
$ 210,000.00
$ 70,000.00
Interest on Investment (A)
$ 10,500.00
$ 3,500.00
$ 14,000.00
(210000*5%)
(70000*5%)
Balance net income (In the Ratio of 2:3) (B)
$ 94,400.00
$ 141,600.00
$ 236,000.00
(236000*2/5)
(236000*3/5)
(250000-14000)
Net income Allocated (A+B)
$ 104,900.00
$ 145,100.00
$ 250,000.00
4
Calculation of participation in the year's net income:
(In case Salary allowances of $30,000 and $40,000, respectively, and the balance divided equally)
Brittany Taylor
Piper Albright
Total
Salary Allowance (A)
$ 30,000.00
$ 40,000.00
$ 70,000.00
Balance net income (to be divided equally) (B)
$ 90,000.00
$ 90,000.00
$ 180,000.00
(180000/2)
(180000/2)
(250000-70000)
Net income Allocated (A+B)
$ 120,000.00
$ 130,000.00
$ 250,000.00
5
Calculation of participation in the year's net income:
(In case Allowance of interest at the rate of 5% on original investments, salary allowances of $30,000 and $40,000, respectively, and the remainder divided equally)
Brittany Taylor
Piper Albright
Total
Original Investment
$ 210,000.00
$ 70,000.00
Interest on Investment (A)
$ 10,500.00
$ 3,500.00
$ 14,000.00
(210000*5%)
(70000*5%)
Salary Allowance (B)
$ 30,000.00
$ 40,000.00
$ 70,000.00
Balance net income (to be divided equally) (C)
$ 83,000.00
$ 83,000.00
$ 166,000.00
(166000/2)
(166000/2)
(250000-14000- 70000)
Net income Allocated (A+B+C)
$ 123,500.00
$ 126,500.00
$ 250,000.00
1
Calculation of participation in the year's net income:
(In case of No agreement concerning division of net income)
Brittany Taylor
Piper Albright
Total
Net income Allocated (To be divided Equally)
$ 125,000.00
$ 125,000.00
$ 250,000.00
2
Calculation of participation in the year's net income:
(In case Divided in the ratio of original capital investment)
Brittany Taylor
Piper Albright
Total
Capital Investment
$ 210,000.00
$ 70,000.00
$ 280,000.00
Capital Investment ratio
0.75
0.25
(210000/280000)
(70000/280000)
Net income Allocated
$ 187,500.00
$ 62,500.00
$ 250,000.00
(250000*0.75)
(250000*0.25)
3
Calculation of participation in the year's net income:
(In case Interest at the rate of 5% allowed on original investments and the remainder divided in the ratio of 2:3)
Brittany Taylor
Piper Albright
Total
Original Investment
$ 210,000.00
$ 70,000.00
Interest on Investment (A)
$ 10,500.00
$ 3,500.00
$ 14,000.00
(210000*5%)
(70000*5%)
Balance net income (In the Ratio of 2:3) (B)
$ 94,400.00
$ 141,600.00
$ 236,000.00
(236000*2/5)
(236000*3/5)
(250000-14000)
Net income Allocated (A+B)
$ 104,900.00
$ 145,100.00
$ 250,000.00
4
Calculation of participation in the year's net income:
(In case Salary allowances of $30,000 and $40,000, respectively, and the balance divided equally)
Brittany Taylor
Piper Albright
Total
Salary Allowance (A)
$ 30,000.00
$ 40,000.00
$ 70,000.00
Balance net income (to be divided equally) (B)
$ 90,000.00
$ 90,000.00
$ 180,000.00
(180000/2)
(180000/2)
(250000-70000)
Net income Allocated (A+B)
$ 120,000.00
$ 130,000.00
$ 250,000.00
5
Calculation of participation in the year's net income:
(In case Allowance of interest at the rate of 5% on original investments, salary allowances of $30,000 and $40,000, respectively, and the remainder divided equally)
Brittany Taylor
Piper Albright
Total
Original Investment
$ 210,000.00
$ 70,000.00
Interest on Investment (A)
$ 10,500.00
$ 3,500.00
$ 14,000.00
(210000*5%)
(70000*5%)
Salary Allowance (B)
$ 30,000.00
$ 40,000.00
$ 70,000.00
Balance net income (to be divided equally) (C)
$ 83,000.00
$ 83,000.00
$ 166,000.00
(166000/2)
(166000/2)
(250000-14000- 70000)
Net income Allocated (A+B+C)
$ 123,500.00
$ 126,500.00
$ 250,000.00