   Chapter 12, Problem 12.4EX

Chapter
Section
Textbook Problem

Dividing partnership incomeUsing each of the live assumptions as to income division listed in Exercise 12-3, determine the income participation of Hawes and Albright if the year’s net income is $104,000. To determine Partnership It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio. To determine: The participation of partners in the net income of the year under various independent assumptions. Explanation Working Notes: Calculations of division of net income under various assumptions are as follows:  H A Total a Net income (1:1)$52,000 $52,000$104,000 b Net income (3:1) (1) $78,000$26,000 $104,000 c Interest allowance (A)$10,500 (2) $3,500 (2)$14,000 Remaining income (2:3)               (B) $36,000$54,000 $90,000 Net income (A)+(B)$46,500 $57,500$104,000 d Salary allowance                          (C) $36,000$45,000 $81,000 Remaining income (1:1) (D)$11,500 $11,500$23,000 Net income                           (C)+(D) $47,500$56,500 \$104,000

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