Question

Tyler Hawes and Piper Albright formed a partnership, investing $441,000 and $147,000, respectively. Determine their participation in the year's net income of $324,000 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 10% allowed on original investments and the remainder divided in the ratio of 2:3.

d. Salary allowances of $93,000 and $129,000, respectively, and the balance divided equally.

e. Allowance of interest at the rate of 10% on original investments, salary allowances of $93,000 and $129,000, respectively, and the remainder divided equally.

Hawes Albright

(a) $ $

(b) $ $

(c) $ $

(d) $ $

(e) $ $

Answer 1

Statement showing allocation of Income
				HAWES	ALBRIGHT	Total
Case-A
Net income fr the year						324000
To be shared equally in absence of agreement				162000	162000	-324000
Income share				162000	162000	0
Case-B
Net Income for the year						324000
To be share in capital ratio i.e. 3:1				243000	81000	-324000
Income share				243000	81000	0
Case-C
Net Income for the year						324000
Interest allowance				44100	14700	58800
Remaining Income						265200
Share of income in 3:2				106080	159120	-265200
Income Share				150180	173820	0
Case-D:
Net Income for the year						324000
Salary Allowance				93000	129000	222000
Remaining Income						102000
Share divided equally				51000	51000	-102000
Income Share				144000	180000	0
Case-E
Net Income for the year						324000
Salary Allowance				93000	129000	222000
Remaining Income						102000
Interest allowance				44100	14700	58800
Remaining Income						43200
Share divided equally				21600	21600	-43200
Income Share				158700	165300	0