Dividing partnership incomeDahl and Westhoff have decided to form a partnership. They have agreed that Dahl is to invest $400,000 and that Westhoff is to invest $100,000. Dahl is to devote one-third time to the business, and Westhoff is to devote two-thirds time. Thefollowing plans for the division of income are being considered:a. Equal divisionb. In the ratio of original investmentsc. In the ratio of time devoted to the businessd. Interest of 5% on original investments and the remainder equallye. Interest of 5% on original investments, salary allowances of $80,000 to Dahl and $160,000 to Westhoff, and the remainder equallyf. Plan (e), except that Westhoff is also to be allowed a bonus of $50,000 if net income exceeds $200,000Required:For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $300,000 and (2) net income of $750,000. Round answers to the nearest whole dollar.(1) $300,000(2) $750,000(2) $750,000WesthoffDahlWesthoffPlana.b.C.d.e.f.(1) $300,000Dahl$ 150,000 ✓$ 240,000 ✓$100,000✓$ 295,000 X$ 117,500 ✓$ 117,500 XFeedback$ 150,000 ✓$ 60,000 ✓$200,000 ✓$182,500 X$182,500✔$182,500 X$375,000 ✓$ 600,000 ✓$ 250,000 ✓$745,000 X$ 342,500 ✓$ 317,500 ✔$375,000$150,000$ 500,000 ✓$ 730,000 X$ 407,500 ✓$432,500▼ Check My WorkSet up a column for each partner for each net income assumption.a. Allocate income to the partners based on the income sharing agreement, if any.b. Allocate income to the partners based on the partners' original investments.c. Allocate income to the partners based on the ratio of time devoted to the business.d. Apply the interest allowance to the partners first. Then allocate the remaining income equally.

Partnership is the relation between two or more people, It has the following characteristicsThey…

d. Interest of 5% on original investments and the remainder equally e. Interest of 5% on original investments, salary allowances of $80,000 to Dahl and $160,000 to Westhoff, and the remainder equally f. Plan (e), except that Westhoff is also to be allowed a bonus of $50,000 if net income exceeds $200,000

d. Interest of 5% on original investments and the remainder equally e. Interest of 5% on original investments, salary allowances of $80,000 to Dahl and $160,000 to Westhoff, and the remainder equally f. Plan (e), except that Westhoff is also to be allowed a bonus of $50,000 if net income exceeds $200,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Dividing partnership income Dahl and Westhoff have decided to form a partnership. They have agreed that Dahl is to invest $400,000 and that Westhoff is to invest $100,000. Dahl is to devote one-third time to the business, and Westhoff is to devote two-thirds 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 $80,000 to Dahl and $160,000 to Westhoff, and the remainder equally f. Plan (e), except that Westhoff is also to be allowed a bonus of $50,000 if net income exceeds $200,000 Required: For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $300,000 and (2) net income of $750,000. Round answers to the nearest whole dollar. (2) $750,000 (1) $300,000 Westhoff (2)…
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