Question

Dividing Partnership Income Tyler Hawes and Piper Albright formed a partnership, investing $116,000 and $174,000, respectively. Determine their participation in the year's net income of $275,000 under each of the following independent assumptions: a. No agreement concerning division of net income. b. Divided in the ratio of original capital investment. c. Interest at the rate of 5% allowed on original investments and the remainder divided in the ratio of 2:3. d. Salary allowances of $36,000 and $46,000, respectively, and the balance divided equally. e. Allowance of interest at the rate of 5% on original investments, salary allowances of $36,000 and $46,000, respectively, and the remainder divided equally. Hawes Albright (a) $ $ (b) $ $ (c) $ $ (d) $ $ (e) $ $

Answer 1

1)
								c)	Particulars			Hawes	Albright	Total
	a)	Hawes	$ 1,37,500.00	($ 275000 x 50%)
		Albright	$ 1,37,500.00	($ 275000 x 50%)					Interest			$      5,800.00	$      8,700.00	$    14,500.00
									Balance profit in 2:3			$ 1,04,200.00	$ 1,56,300.00	$ 2,60,500.00
	b)	Hawes	$ 1,10,000.00	($ 275000 x $ 116000 / $ 290000)					Total			$ 1,10,000.00	$ 1,65,000.00
		Albright	$ 1,65,000.00	($ 275000 x $ 174000 / $ 290000)
								d)	Particulars			Hawes	Albright	Total
									Salary allowances			$    36,000.00	$    46,000.00	$    82,000.00
									Balance profit equally			$    96,500.00	$    96,500.00	$ 1,93,000.00
									Total			$ 1,32,500.00	$ 1,42,500.00
								e)	Particulars			Hawes	Albright	Total
									Interest			$      5,800.00	$      8,700.00	$    14,500.00
									Salary allowances			$    36,000.00	$    46,000.00	$    82,000.00
									Balance profit equally			$    89,250.00	$    89,250.00	$ 1,78,500.00
									Total			$ 1,31,050.00	$ 1,43,950.00

2.b.1)	Particulars			Debit	Credit
	Revenues			$ 6,68,000.00
	To Expenses				$ 5,20,000.00
	To Martin Farley, Member Equity				$    88,800.00
	To Ashley Clark, Member Equity				$    59,200.00