a. No agreement concerning division of net income. b. Divided in the ratio of original capital investment. c. Interest at the rate of 6% allowed on original investments and the remainder divided in the ratio of 2:3. d. Salary allowances of $38,000 and $47,000, respectively, and the balance divided equally. e. Allowance of interest at the rate of 6% on original investments, salary allowances of $38,000 and $47,000, respectively, and the remainder divided equally.

a. No agreement concerning division of net income. b. Divided in the ratio of original capital investment. c. Interest at the rate of 6% allowed on original investments and the remainder divided in the ratio of 2:3. d. Salary allowances of $38,000 and $47,000, respectively, and the balance divided equally. e. Allowance of interest at the rate of 6% on original investments, salary allowances of $38,000 and $47,000, respectively, and the remainder divided equally.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Dividing Partnership Income
Beau Dawson and Willow McDonald formed a partnership, investing $180,000 and $60,000, respectively.
Determine their participation in the year's net income of $290,000 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 6% allowed on original investments and the remainder divided in the ratio of 2:3.
d. Salary allowances of $38,000 and $47,000, respectively, and the balance divided equally.
e. Allowance of interest at the rate of 6% on original investments, salary allowances of $38,000 and $47,000, respectively, and the
remainder divided equally.
Dawson
a.
b.
C.
d.
e.
McDonald

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Step 2: a. No agreement concerning division of net income

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Step 3: b. Divide in the ratio of original capital investments

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Step 4: c. Interest at the rate of 6% allowed on original investment and the remainder divide in ratio 2:3.

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