Question

Dividing Partnership Income Candace Hassell and Abby Lawson formed a partnership, investing $295,200 and $196,800, respectively. Determine their participation in the year's net income of $258,000, 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 18% allowed on original investments and the remainder divided in the ratio of 2:3. Salary allowances of $78,000 and $108,000, respectively, and the balance divided equally. Allowance of interest at the rate of 18% on original investments, salary allowances of $78,000 and $108,000, respectively, and the remainder divided equally.

Answer 1

Solution:

Division of Income
S. No.	Particulars	Total	Hassell	Lawson
1	No agreement concerning division of net income:
	Net Income (1:1)	$258,000.00	$129,000.00	$129,000.00
2	Division in ratio of original capital investment:
	Net Income (295200:196800)	$258,000.00	$154,800.00	$103,200.00
3	Interest on capital and ramainder in ration of 2:3:
	Net Income	$258,000.00
	Interest on capital	$88,560.00	$53,136.00	$35,424.00
	Balance of income	$169,440.00
	Remaining income (2:3)	$169,440.00	$67,776.00	$101,664.00
	Total share of income	$258,000.00	$120,912.00	$137,088.00
4	Salary allowance and remaining equally:
	Net Income	$258,000.00
	Salary Allowance	$186,000.00	$78,000.00	$108,000.00
	Balance of income	$72,000.00
	Remaining income (1:1:1)	$72,000.00	$36,000.00	$36,000.00
	Total share of income	$258,000.00	$114,000.00	$144,000.00
5	Interest on capital, Salary allowance and ramainder equally:
	Net Income	$258,000.00
	Interest on capital	$88,560.00	$53,136.00	$35,424.00
	Balance of income	$169,440.00
	Salary Allowance	$186,000.00	$78,000.00	$108,000.00
	Balance of income	-$16,560.00
	Remaining income (1:1:1)	-$16,560.00	-$8,280.00	-$8,280.00
	Total share of income	$258,000.00	$122,856.00	$135,144.00