Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $249,000 and that Shannon is to invest $83,000. Black is to devote one-half time to the business, and Shannon 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 5% on original investments and the remainder equally. e. Interest of 5% on original investments, salary allowances of $55,000 to Black and $85,000 to Shannon, and the remainder equally. f. Plan (e), except that Shannon 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 $142,000 and (2) net income of $230,000. Round answers to the nearest whole dollar.
Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $249,000 and that Shannon is to invest $83,000. Black is to devote one-half time to the business, and Shannon 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 5% on original investments and the remainder equally. e. Interest of 5% on original investments, salary allowances of $55,000 to Black and $85,000 to Shannon, and the remainder equally. f. Plan (e), except that Shannon 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 $142,000 and (2) net income of $230,000. Round answers to the nearest whole dollar.
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter19: Accounting For Partnerships
Section: Chapter Questions
Problem 2SEB
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