Question

Morrison and Greene have decided to form a partnership. They have agreed that Morrison is to invest $267,000 and that Greene is to invest $89,000. Morrison is to devote one-half time to the business, and Greene is to devote full time. The following plans for the division of income are being considered:

1. Interest of 5% on original investments, salary allowances of $45,000 to Morrison and $75,000 to Greene, and the remainder equally
2. Plan (e), except that Greene is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances

Required:

For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $178,000 and (2) net income of $225,000. Round answers to the nearest whole dollar.

	(1)				(2)
	$178,000				$225,000
Plan		Morrison		Greene		Morrison		Greene

Answer 1

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