Question

Dividing Partnership Income

Morrison and Greene have decided to form a partnership. They have agreed that Morrison is to invest $240,000 and that Greene is to invest $80,000. 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:

1. Equal division.
2. In the ratio of original investments.
3. In the ratio of time devoted to the business.
4. Interest of 6% on original investments and the remainder equally
5. Interest of 6% on original investments, salary allowances of $55,000 to Morrison and $75,000 to Greene, and the remainder equally
6. 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 $148,000 and (2) net income of $215,000. Round answers to the nearest whole dollar.

	(1)				(2)
	$148,000				$215,000
Plan		Morrison		Greene		Morrison		Greene
a.		$		$		$		$
b.		$		$		$		$
c.		$		$		$		$
d.		$		$		$		$
e.		$		$		$		$
f.		$		$		$		$

Answer 1

	148,000.00				215,000.00
Plan	Morrison		Greene		Morrison		Greene
a.	74,000.00		74,000.00		107,500.00		107,500.00
b.	111,000.00		37,000.00		161,250.00		53,750.00
c.	49,333.33		98,666.67		71,667.00		143,333.00
d.	14,400.00		4,800.00		14,400.00		4,800.00
	64,400.00		64,400.00		97,900.00		97,900.00
Total	78,800.00		69,200.00		112,300.00		102,700.00
e.	14,400.00		4,800.00		14,400.00		4,800.00
	55,000.00		75,000.00		55,000.00		75,000.00
	-        600.00		-          600.00		32,900.00		32,900.00
Total	68,800.00		79,200.00		102,300.00		112,700.00
f.	14,400.00		4,800.00		14,400.00		4,800.00
	55,000.00		75,000.00		55,000.00		75,000.00
			3,600.00				17,000.00
	-          2,400.00		-            2,400.00		24,400.00		24,400.00
Total	67,000.00		81,000.00		93,800.00		121,200.00