Dividing Partnership Income Candace Hassell and Abby Lawson formed a partnership
ID: 2492493 • Letter: D
Question
Dividing Partnership Income Candace Hassell and Abby Lawson formed a partnership, investing $144,000 and $96,000, respectively. Determine their participation in the year's net income of $288,000, 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 12% allowed on original investments and the remainder divided in the ratio of 2:3. Salary allowances of $38,000 and $52,000, respectively, and the balance divided equally. Allowance of interest at the rate of 12% on original investments, salary allowances of $38,000 and $52,000, respectively, and the remainder divided equally.
Explanation / Answer
calculation of the participation of the partners in the net income a in the ratio of the original capital investments capital investments hassell 144000 abby lawson 96000 total capital investments 240000 ratio of hassell capital investment 144000 / 240000 ratio of hassell capital investment 60% ratio of abby lawson capital investment 96000 / 240000 ratio of abby lawson capital investment 40% net income 288000 participation of hassell in net income 288000 * 60 % participation of hassell in net income 172800 participation of abby lawson in net income 288000 * 40% participation of abby lawson in net income 115200 b participation in the ratio of 2 : 3 net income 288000 less : interest on original investments hassell 144000 * 12 % hassell 17280 abby lawson 96000 * 12 % abby lawson 11520 total interest amount 17280 + 11520 total interest amount 28800 net income available for distribution 288000 - 28800 net income available for distribution 259200 total participation . 2 : 3 total participation 5 participation of hassell in net income 259200 * 2 / 3 participation of hassell in net income 172800 participation of abby lawson in net income 259200 * 3 / 5 participation of abby lawson in net income 155520 c participation in equal ratio net income 288000 less : salary allowance hassell 38000 abby lawson 52000 total salary allowance 38000 + 52000 total salary allowance 90000 net income available for distribution 288000 - 90000 net income available for distribution 198000 total participation . 1 : 1 total participation 2 participation of hassell in net income 198000 * 1/ 2 participation of hassell in net income 99000 participation of abby lawson in net income 198000 * 1/ 2 participation of abby lawson in net income 99000 d profits participation in equal ratio net income 288000 less : interest on original investments hassell 144000 * 12 % hassell 17280 abby lawson 96000 * 12 % abby lawson 11520 total interest amount 17280 + 11520 total interest amount 28800 salary allowance hassell 38000 abby lawson 52000 total salary allowance 38000 + 52000 total salary allowance 90000 total payments 28800 + 90000 total payments 118800 net income available for distribution 288000 - 118800 net income available for distribution 169200 total participation . 1 : 1 total participation 2 participation of hassell in net income 169200 * 1 / 2 participation of hassell in net income 84600 participation of abby lawson in net income 169200 * 1 / 2 participation of abby lawson in net income 84600