EX 124 Dividing partnership income Obj 2 Using each of the f

EX 12-4 Dividing partnership income Obj. 2 Using each of the five assumptions as to income division listed in Exercise 12- 3, determine the income participation of Hawes and Albright if the year\'s net Show income is $104,000. How Answer Check Figure: Hawes, $46,500

Solution

Solution 12-4:

Division of Income	Net Income for year - $104,000
Plan	Particulars	Hawes	Albright	Total
a	No agreement concerning division of income (1:1)	$52,000.00	$52,000.00	$52,000.00
b	In the ratio of original capital investment (3:1)	$78,000.00	$26,000.00	$104,000.00
c	5% interest on original investment and remainder in ratio of 2:3
	Total Income (Loss)			$104,000.00
	Interest on capital	$10,500.00	$3,500.00	$14,000.00
	Balance of Income (Loss)			$90,000.00
	Balance to be allocated in ratio of (2:3)	$36,000.00	$54,000.00	$90,000.00
	Total Share of income	$46,500.00	$57,500.00	$104,000.00
d	A salary allowance of $36,000 and $45,000 respectively and balance divided equally:
	Total Income (Loss)			$104,000.00
	Salary to Partners	$36,000.00	$45,000.00	$81,000.00
	Balance of Income (Loss)			$23,000.00
	Balance to be allocated Equally (1:1)	$11,500.00	$11,500.00	$23,000.00
	Total Share of Income	$47,500	$56,500	$104,000
e	5% interest on original investment, A salary allowance of $36,000 and $45,000 respectively, and balance divided equally:
	Total Income (Loss)			$104,000.00
	Interest on capital	$10,500.00	$3,500.00	$14,000.00
	Balance of Income (Loss)			$90,000.00
	Salary to Partners	$36,000.00	$45,000.00	$81,000.00
	Balance of Income (Loss)			$9,000.00
	Balance to be allocated equally	$4,500.00	$4,500.00
	Total Share of Income	$51,000.00	$53,000.00	$104,000.00