Question

Dividing Partnership Income

Morrison and Greene have decided to form a partnership. They have agreed that Morrison is to invest $150,000 and that Greene is to invest $50,000. 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 $50,000 to Morrison and $70,000 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 $118,000 and (2) net income of $255,000. Round answers to the nearest whole dollar.

	(1)				(2)
	$118,000				$255,000
Plan		Morrison		Greene		Morrison		Greene
a.		$		$		$		$
b.		$		$		$		$
c.		$		$		$		$
d.		$		$		$		$
e.		$		$		$		$
f.		$		$		$		$

Answer 1

	118,000.00		255,000.00
	Morrison	Greene	Morrison	Greene
a	59,000.00	59,000.00	127,500.00	127,500.00
b	88,500.00	29,500.00	191,250.00	63,750.00
c	39,333.33	78,666.67	85,000.00	170,000.00
d	10,260.00	3,420.00	10,260.00	3,420.00
	52,160.00	52,160.00	120,660.00	120,660.00
Total	62,420.00	55,580.00	130,920.00	124,080.00
e	10,260.00	3,420.00	10,260.00	3,420.00
	50,000.00	90,000.00	50,000.00	90,000.00
	- 17,840.00	- 17,840.00	50,660.00	50,660.00
Total	42,420.00	75,580.00	110,920.00	144,080.00
f	10,260.00	3,420.00	10,260.00	3,420.00
	50,000.00	90,000.00	50,000.00	90,000.00
				23,000.00
	- 17,840.00	- 17,840.00	39,160.00	39,160.00
Total	42,420.00	75,580.00	99,420.00	155,580.00