Dylan Howell and Demond Nickles have decided to form a partnership. They have agreed that Howell is to invest $50,000 and that Nickles is to invest $75,000. Howell is to devote full time to the business, and Nickles is to devote one-half time. The following 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 10% on original investments and the remainder in the ratio of 3:2e. Interest of 10% on original investments, salary allowances of $38,000 to Howell and $19,000 to Nickles, and the remainder equally.f. Plan (e), except that Howell is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowancesInstructionsFor each plan, determine the division of the net income under each of the following assumptions:(1) net income of $420,000 and (2) net income of $150,000. Present the data in tabular form, using the following columnar headings:                                     $420,000                                 $150,000              Plan       Howell        Nickles                      Howell     Nickles

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Asked Dec 19, 2019
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Dylan Howell and Demond Nickles have decided to form a partnership. They have agreed that Howell is to invest $50,000 and that Nickles is to invest $75,000. Howell is to devote full time to the business, and Nickles is to devote one-half 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 10% on original investments and the remainder in the ratio of 3:2
e. Interest of 10% on original investments, salary allowances of $38,000 to Howell and $19,000 to Nickles, and the remainder equally.
f. Plan (e), except that Howell is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances

Instructions

For each plan, determine the division of the net income under each of the following assumptions:
(1) net income of $420,000 and (2) net income of $150,000. Present the data in tabular form, using the following columnar headings:
                                     $420,000                                 $150,000
              Plan       Howell        Nickles                      Howell     Nickles

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The division of net income of $420,000and $150,000under different plans is as follows: Net Income Net Income $4,20,000 $1,50,000 Plan н н a. Equal division b. In the ratio of original investment c. In the ratio of time devoted $210,000 $210,000 S75,000 $75,000 $168,000 $252,000 s60,000 $90,000 $280,000 $140,000 s100,000 $50,000 to the business d. Interest of 10% on original investments and remainder in $249,500 $170,500 s87,500 $62,500 the ratio of 3:2 e. Interest of 10% on original investments, salary allowances of $38,000 to H and $19,000 to N, and the remainder equally $218,250 $201,750 $83,250 866,750 f. Plan (e) except that H is also to be allowed a bonus equal to | 20% of the amount by which net income exceeds the total $254,550 $165,450o s92,550 $57,450 salary allowances.

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Net Income Net Income $4,20,000 $1,50,000 н н Plan (a) Income sharing ratio under this plan is equal. So, the ratio is 1:1 Distribution of Net Income $210,000 $210,000 $75,000 S75,000 (1:1) Plan (b) Income sharing ratio under this plan is the ratio of original investment by H and Ni.e. $50,000 & $75,000 respectively. So, the ratio is 2:3 Distribution of Net Income (2:3) $168,000 $252,000 $60,000 $90,000 Plan (c) Income sharing ratio under this plan is the ratio of time devoted by H and N i.e. full time & 1/2 time respectively. So, the ratio is 2:1 Distribution of Net Income (2:1) $280,000 $140,000 s100,000 $50,000

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Plan (d) $5,000 $7,500 Interest allowance (1) $7,500 $5,000 Income sharing ratio under this plan is 3:2. Any income left after allowing interest on capital will be distributed in 3:2 ratio. Remaining Income (3:2) $244,500 s163,000 s82,500 $55,000 $249,500 $170,500 s87,500 $62,500 Net Income Plan (e) $5,000 s7,500 $38,000 $19,000 S38,000 $19,000 $5,000 s7,500 Interest allowance (1) Salary allowance Any excess income left after deducting interest and salary allowance will be distributed among partners equally. So, the income or loss sharing ratio is 1:1 Remaining Income (1:1) $175,250 $175,250 $40,250 S$40,250 $218,250 $201,750 $83,250 S66,750 Net Income

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