Question

Dividing Partnership Income

Morrison and Greene have decided to form a partnership. They have agreed that Morrison is to invest $282,000 and that Greene is to invest $94,000. 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:

A) Equal division.

B) In the ratio of original investments

C) In the ratio of time devoted to the business.

D) Interest of 6% on original investments and the remainder equally

E) Interest of 6% on original investments, salary allowances of $40,000 to Morrison and $80,000 to Greene, and the remainder equally

F) 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 $175,000 and (2) net income of $245,000. Round answers to the nearest whole dollar. (1) (2) $175,000 $245,000 Plan Morrison Greene Morrison Greene a. $ $ $ $ b. $ $ $ $ c. $ $ $ $ d. $ $ $ $ e. $ $ $ $ f. $ $ $ $

Answer 1