Dividing Partnership IncomeTyler Hawes and Piper Albright formed a partnership, investing $116,000 and $174,000, respectively.Determine their participation in the year's net income of $275,000 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 6% allowed on original investments and the remainder divided in the ratio of 2:3.Salary allowances of $38,000 and $49,000, respectively, and the balance divided equally.Allowance of interest at the rate of 6% on original investments, salary allowances of $38,000 and $49,000, respectively, and the remainder divided equally.HawesAlbright(a)$$(b)$$(c)$$(d)$$(e)$$

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Asked Nov 1, 2019
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Dividing Partnership Income
Tyler Hawes and Piper Albright formed a partnership, investing $116,000 and $174,000, respectively.
Determine their participation in the year's net income of $275,000 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 6% allowed on original investments and the remainder divided in the ratio of 2:3.
Salary allowances of $38,000 and $49,000, respectively, and the balance divided equally.
Allowance of interest at the rate of 6% on original investments, salary allowances of $38,000 and $49,000, respectively, and the remainder divided equally.

Hawes
Albright
(a)
$
$
(b)
$
$
(c)
$
$
(d)
$
$
(e)
$
$

 

 

 

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Expert Answer

Step 1

The division of net income has been shown in above equation. Where the net income is divided in both partners.

Compute the amount of net income by using the equation given below:
Division of net income = net incomex.
Tyler $275,000x
=$137,500
1
Piper $275,000x
=$137,500
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Compute the amount of net income by using the equation given below: Division of net income = net incomex. Tyler $275,000x =$137,500 1 Piper $275,000x =$137,500

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Step 2

The ratio of capital investment has been shown in the above equation, the net income is divided in their share ratio of capital contribution.

Compute the ratio of capital investment for Tyler and Piper by using the equation shown below
Ratio of capital investment $116,000: S174, 000
=116: 174
Tyler Net incomexshare ratio
116
=S275,000x-
290
$275,000x 0.4
=$110,000
174
Piper $275,000 x
290
S275,000x0.6
$165,000
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Compute the ratio of capital investment for Tyler and Piper by using the equation shown below Ratio of capital investment $116,000: S174, 000 =116: 174 Tyler Net incomexshare ratio 116 =S275,000x- 290 $275,000x 0.4 =$110,000 174 Piper $275,000 x 290 S275,000x0.6 $165,000

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Step 3

In the above equation,  the interest calculation for both partners has been sho...

Compute the interest calculation in the original contribution and remaining to be in a ratio of 2:3
Interest calculati on Original capital x Interest rate
Tyler $116,000x 6%
= S6,960
Piper $174,000 x 6%
=$10,440
Remaining balance $275,000-$6.960- $10,440
=S257,600
Remaining balance divided in the ratio of 2:3
2
Tyler $257,600x-
5
=S103,040
Piper $257,600 x -
=$154,560
Total Interest Tyler $6960+ $103,040
=$110,000
Piper S10,440+$15,4560
$165,000
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Compute the interest calculation in the original contribution and remaining to be in a ratio of 2:3 Interest calculati on Original capital x Interest rate Tyler $116,000x 6% = S6,960 Piper $174,000 x 6% =$10,440 Remaining balance $275,000-$6.960- $10,440 =S257,600 Remaining balance divided in the ratio of 2:3 2 Tyler $257,600x- 5 =S103,040 Piper $257,600 x - =$154,560 Total Interest Tyler $6960+ $103,040 =$110,000 Piper S10,440+$15,4560 $165,000

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