Dividing Partnership Income
Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $168,000 and that Shannon is to invest $56,000. Black is to devote
one-half time to the business, and Shannon is to devote full time. The following plans for the division of income are being considered:
a. Equal division
b. In the ratio of original investments.
c. In the ratio of time devoted to the business.
d. Interest of 6% on original investments and the remainder equally.
e. Interest of 6% on original investments, salary allowances of $40,000 to Black and $70,000 to Shannon, and the remainder equally.
f. Plan (e), except that Shannon is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances.
Required:
For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $151,000 and (2) net income of $215,000. Round
answers to the nearest whole dollar.
(1)
$151,000
(2)
$215,000
Plan
Black
Shannon
Black
Shannon
a
75,500
75,500
107,500
107,500
b
113,250
37,750
161,250
53,750
c
50,333
100,667
71,667
143,333
d
78,660
72,140
110,060
104,140
e
13,780
48,200
