27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Dividing partnership income

Using 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


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.


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)





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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