Tyler Hawes and Piper Albright formed a partnership investin

Tyler Hawes and Piper Albright formed a partnership, investing $264,000 and $132,000, respectively. Determine their participation in the year\'s net income of $318,000 under each of the following independent assumptions: No agreement concerning division of net income. Divided in the ratio of original capital investment. Interest at the rate of 10% allowed on original investments and the remainder divided in the ratio of 2:3. Salary allowances of $63,000 and $87,000, respectively, and the balance divided equally. Allowance of interest at the rate of 10% on original investments, salary allowances of $63,000 and $87,000, respectively, and the remainder divided equally. Hawes Albright (a) $ 159,000 $ 159,000 (b) $ 279,840 $ 139,920 (c) $ $ (d) $ $ (e) $ $

Solution

c. Calculation of participation in the year\'s net income: (In case Interest at the rate of 10% allowed on original investments and the remainder divided in the ratio of 2:3) Brittany Taylor Piper Albright Total Original Investment 264000 132000 Interest on Investment @ 10% (A) 26400 13200 39600 Balance net income (In the Ratio of 2:3) (B) 111360 167040 278400 (278400*2/5) (278400*3/5) (318000-39600) Net income Allocated (A+B) 137760 180240 318000 d. Calculation of participation in the year\'s net income: (In case Salary allowances of $63,000 and $87,000, respectively, and the balance divided equally) Brittany Taylor Piper Albright Total Salary Allowance (A) 63000 87000 150000 Balance net income (to be divided equally) (B) 84000 168000 168000 (168000/2) (168000/2) (318000-150000) Net income Allocated (A+B) 147000 255000 318000 e. Calculation of participation in the year\'s net income: (In case Allowance of interest at the rate of 10% on original investments, salary allowances of $63,000 and $87,000, respectively, and the remainder divided equally) Brittany Taylor Piper Albright Total Original Investment 264000 132000 Interest on Investment @10% (A) 26400 13200 39600 Salary Allowance (B) 63000 87000 150000 Balance net income (to be divided equally) (C) 64200 64200 128400 (128400/2) (128400/2) (318000-39600- 150000) Net income Allocated (A+B+C) 153600 164400 318000