Question

Tyler Hawes and Piper Albright formed a partnership, investing $264,000 and $132,000, respectively. Determine their participation in the year's net income of $318,000 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 $63,000 and $87,000, respectively, and the balance divided equally. Allowance of interest at the rate of 10% on original investments, salary allowances of $63,000 and $87,000, respectively, and the remainder divided equally. Hawes Albright (a) $ 159,000 $ 159,000 (b) $ 279,840 $ 139,920 (c) $ $ (d) $ $ (e) $ $

Answer 1

c. Calculation of participation in the year's net income:
(In case Interest at the rate of 10% allowed on original investments and the remainder divided in the ratio of 2:3)
	Brittany Taylor	Piper Albright	Total
Original Investment	264000	132000
Interest on Investment @ 10% (A)	26400	13200	39600
Balance net income (In the Ratio of 2:3) (B)	111360	167040	278400
	(278400*2/5)	(278400*3/5)	(318000-39600)
Net income Allocated (A+B)	137760	180240	318000

d. Calculation of participation in the year's net income:
(In case Salary allowances of $63,000 and $87,000, respectively, and the balance divided equally)
	Brittany Taylor	Piper Albright	Total
Salary Allowance (A)	63000	87000	150000
Balance net income (to be divided equally) (B)	84000	168000	168000
	(168000/2)	(168000/2)	(318000-150000)
Net income Allocated (A+B)	147000	255000	318000

e. Calculation of participation in the year's net income:
(In case Allowance of interest at the rate of 10% on original investments, salary allowances of $63,000 and $87,000, respectively, and the remainder divided equally)
	Brittany Taylor	Piper Albright	Total
Original Investment	264000	132000
Interest on Investment @10% (A)	26400	13200	39600
Salary Allowance (B)	63000	87000	150000
Balance net income (to be divided equally) (C)	64200	64200	128400
	(128400/2)	(128400/2)	(318000-39600- 150000)
Net income Allocated (A+B+C)	153600	164400	318000