Dividing partnership income 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:

BuyFind

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
BuyFind

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Solutions

Chapter 12, Problem 2PB
Textbook Problem

Dividing partnership income

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:

  1. a. Equal division
  2. b. In the ratio of original investments
  3. c. In the ratio of time devoted to the business
  4. d. Interest of 10% on original investments and the remainder in the ratio of 3:2
  5. e. Interest of 10% on original investments, salary allowances of $38,000 to Howell and $19,000 to Nickles, and the remainder equally.
  6. 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:

Chapter 12, Problem 2PB, Dividing partnership income Dylan Howell and Demond Nickles have decided to form a partnership. They

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Chapter 12 Solutions

Financial Accounting
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