Question

Tyler Hawes and Piper Albright formed a partnership, investing $333,000 and $111,000, respectively.

Determine their participation in the year's net income of $288,000 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 18% allowed on original investments and the remainder divided in the ratio of 2:3.

D) Salary allowances of $71,000 and $97,000, respectively, and the balance divided equally.

E) Allowance of interest at the rate of 18% on original investments, salary allowances of $71,000 and $97,000, respectively, and the remainder divided equally.

Answer 1

Statement showing computations
Particulars	Tyler Hawes	Piper Albright	Total
A) Equally	144,000.00	144,000.00	288,000.00
B) Investment = 288,00/(333,000+111,000)*Invt	216,000.00	72,000.00	288,000.00
C) Total Profit			288,000.00
Intt at 18%	59,940.00	19,980.00	79,920.00
Remaining profit in 3:2	83,232.00	124,848.00	208,080.00
Total participation	143,172.00	144,828.00
D) Total Profit			288,000.00
Less Salary	71,000.00	97,000.00	168,000.00
Remaining profit in 1:1	60,000.00	60,000.00	120,000.00
Total participation	131,000.00	157,000.00
E) Total Profit			288,000.00
Less : Intt at 18%	59,940.00	19,980.00	79,920.00
Less Salary	71,000.00	97,000.00	168,000.00
Remaining profit in 1:1	20,040.00	20,040.00	40,080.00
Total participation	150,980.00	137,020.00