Jack and Jill plan to start a restaurant business together in the form of a partnership. Jack, a chef, will do most of the work (sweat equity) and provide minimal capital (cash equity), while Jill (who is rich and has business skills) will provide most of the capital and work only part-time doing back office business functions. The partners agreed that Jack and Jill will receive a monthly salary allowance of $5,000 and $1,000, respectively, to compensate them for their work. They will also each receive a 15% interest on capital contributed. Jack provided $5,000 capital and Jill provided $45,000 of capital. Any remaining balance (positive or negative) will be split equally. During the first month of operation, the restaurant made $10,000 of net income. Instructions: Determine how much of the $10,000 net income should go to each partner.
Jack and Jill plan to start a restaurant business together in the form of a
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