Question

Dividing Partnership Income

Tyler Hawes and Piper Albright formed a partnership, investing $302,400 and $201,600, respectively.

Determine their participation in the year's net income of $246,000 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 $81,000 and $111,000, respectively, and the balance divided equally.

Allowance of interest at the rate of 12% on original investments, salary allowances of $81,000 and $111,000, respectively, and the remainder divided equally.

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

Answer 1

A) In case of no agreement profit is share equally
	Hawe	Albright
Profit	$                     1,23,000.00	$            1,23,000.00
B)	Ratio of capital 1.5: 1
	Hawe	Albright
Profit	$                     1,47,600.00	$                98,400.00
	246000*1.5/2.5	246000/2.5
C)	Hawe	Albright	total
interest	$                        36,288.00	$                24,192.00	$       60,480.00
	302400*12%	201600*12%
Balance profit	$                        74,208.00	$            1,11,312.00	$   1,85,520.00
	185520*2/5	185520*3/5
	$                     1,10,496.00	$            1,35,504.00	$   2,46,000.00
D)	hawe	Albright	total
salary	$                        81,000.00	$            1,11,000.00	$   1,92,000.00
Balance profit	$                        27,000.00	$                27,000.00	$       54,000.00
	$                     1,08,000.00	$            1,38,000.00	$   2,46,000.00
E)	hawe	Albright	total
salary	$                        81,000.00	$            1,11,000.00	$   1,92,000.00
interest	$                        36,288.00	$                24,192.00	$       60,480.00
Balance profit	$                         -3,240.00	$                -3,240.00	$       -6,480.00
	$                     1,14,048.00	$            1,31,952.00	$   2,46,000.00