Question

In: Accounting

Dividing Partnership Income Tyler Hawes and Piper Albright formed a partnership, investing $75,000 and $225,000, respectively....

Dividing Partnership Income

Tyler Hawes and Piper Albright formed a partnership, investing $75,000 and $225,000, respectively.

Determine their participation in the year's net income of $109,000 under each of the following independent assumptions:

a. No agreement concerning division of net income.

b. Divided in the ratio of original capital investment.

c. Interest at the rate of 6% allowed on original investments and the remainder divided in the ratio of 2:2.

d. Salary allowances of $38,000 and $50,000, respectively, and the balance divided equally.

e. Allowance of interest at the rate of 6% on original investments, salary allowances of $38,000 and $50,000, respectively, and the remainder divided equally.

Solutions

Expert Solution

Amount in $
a.) Tyler Hawes Piper Albright
Participation in year's Net Income                                   54,500                                    54,500
=109000/2 =109000/2
b.) Tyler Hawes Piper Albright
Participation in year's Net Income                                   27,250                                    81,750
=109000*75000/300000 '=109000*75000/300000
c.) Tyler Hawes Piper Albright
Interest Allowed @6%                                     4,500                                    13,500
Remainder 2:2 ( 109,000-4,500-13,500 )                                   45,500                                    45,500
Participation in year's Net Income                                   50,000                                    59,000
d.) Tyler Hawes Piper Albright
Salary allowance                                   38,000                                    50,000
Balance-equal ( 109,000 - 38,000 - 50,000 )                                   10,500                                    10,500
Participation in year's Net Income                                   48,500                                    60,500
e.) Tyler Hawes Piper Albright
Interest Allowed @6%                                     4,500                                    13,500
Salary allowance                                   38,000                                    50,000
Balance-Equal (109,000 - 4,500 - 13,500 - 38,000 - 50,000 )                                     1,500                                      1,500
Participation in year's Net Income                                   44,000                                    65,000

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