Candace Hassell and Abby Lawson formed a partnership, investing $477,000 and $15
ID: 2475057 • Letter: C
Question
Candace Hassell and Abby Lawson formed a partnership, investing $477,000 and $159,000, respectively. Determine their participation in the year's net income of $294,000 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 18% allowed on original investments and the remainder divided in the ratio of 2:3. Salary allowances of $101,000 and $139,000, respectively, and the balance divided equally. Allowance of interest at the rate of 18%pn original investments, salary allowances of $101,000 and $139,000, respectively, and the remainder divided equally. Set up a column for each partner and a total column. Determine the distribution of income and losses in the absence of a partnership agreement. Use the ratio of the partner's original capital investment to distribute the net income.Explanation / Answer
a)In case of no agreement Income is distributed equally .
Hasselll = 147000 [294000/2]
Lawson = 147000
b)Total capital = 477000+159000=636000
Hassell = 294000 * 477000/636000 = 220500
Lawson = 294000*159000/636000 = 73500
c) Remaining Income after interest = 294000 -(636000*18%) = 294000- 114480= 179520
Hassell = (179520 * 2/5) + (477000*.18)
= 71808+ 85860= 157668
Lawson = (179520*3/5 )+(159000*.18)
= 107712+ 28620 = 136332
d)Total salary = 101000+139000=240000
Remaining income = 294000-240000 = 54000
Hasell = (54000/2) +101000 = 128000
Lawson = (54000/2) + 139000= 166000
e)Income after salary and interest = 294000-240000-114480 = -60480
Hassell = 85860 + 101000+ (-60480/2)
= 156620
lAWson = 28620 + 139000+ (-60480/2)
= 137380