Question

Tyler Hawes and Piper Albright formed a partnership, investing $180,000 and $120,000, respectively.

Determine their participation in the year's net income of $366,000 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 10% allowed on original investments and the remainder divided in the ratio of 2:3.

Salary allowances of $48,000 and $66,000, respectively, and the balance divided equally.

Allowance of interest at the rate of 10% on original investments, salary allowances of $48,000 and $66,000, respectively, and the remainder divided equally.

	Hawes	Albright
(a)	$	$
(b)	$	$
(c)	$	$
(d)	$	$
(e)	$	$

Answer 1

Assumptions	Hawes	Albright	Total
(a) 50% each	$                        183,000	$                          183,000	$                366,000
	($366,000*0.5)	($366,000*0.5)
(b) In the ratio of original capital investment.	$                        219,600	$                          146,400	$                366,000
	($366,000*180/300)	($366,000*120/300)
	Hawes	Albright
(c ) 10% interest on capital	$                          18,000	$                            12,000	$                   30,000
remainder divided in the ratio of 2:3.
($366,000-$30,000= $336,000)	$                        134,400	$                          201,600	$                336,000
	(336000*2/5)	(336000*3/5)
Total sharing	$                        152,400	$                          213,600	$                366,000
(d)	Hawes	Albright
Salary allowances	$                          48,000	$                            66,000	$                114,000
Balance equally (366000-114000) =252000	$                        126,000	$                          126,000	$                252,000
	(252000*0.5)	(252000*0.5)
Total sharing	$                        174,000	$                          192,000	$                366,000
(e)	Hawes	Albright
10% interest on capital	$                          18,000	$                            12,000	$                   30,000
Salary allowances	$                          48,000	$                            66,000	$                114,000
Balance equally (366000-30000-114000) =222000	$                        111,000	$                          111,000	$                222,000
Total sharing	$                        177,000	$                          189,000	$                366,000