Question

Tyler Hawes and Piper Albright formed a partnership, investing $360,000 and $180,000, respectively. Determine their participation in the year's net income of $240,000 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 10% allowed on original investments and the remainder divided in the ratio of 2:3. d. Salary allowances of $86,000 and $118,000, respectively, and the balance divided equally. e. Allowance of interest at the rate of 10% on original investments, salary allowances of $86,0 and S11B O respective and the rema naera vided equally Hawes Albright

Answer 1

Allocation of Income among partners
Case-a:
			HAWES	ALBRIGHT	Net income
Net income					240000
To be shares equally			120000	120000	-240000
Share f income			120000	120000	0
Case-b
			HAWES	ALBRIGHT	Net income
Net income					240000
To be shares in capital ratio i.e.2:1			160000	80000	-240000
Share f income			160000	80000	0
Case-c
			HAWES	ALBRIGHT	Net income
Net income					240000
Interest on capital alowd at 10%			36000	18000	-54000
Remaining income					186000
Shares in ratio of 2:3			74400	111600	-186000
Share of Income			110400	129600	0
Case-d
			HAWES	ALBRIGHT	Net income
Net income					240000
Salary			86000	118000	204000
Remaining income					36000
Shares in ratio of 1:1			18000	18000	-36000
Share of Income			104000	136000	0
Case-e
			HAWES	ALBRIGHT	Net income
Net income					240000
Salary			86000	118000	204000
Remaining income					36000
Interest on capital			36000	18000	-54000
Remaining Loss					-18000
Share of loss equally			-9000	-9000	18000
Share of Income			113000	127000	0