Dividing Partnership Income Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $201,000 and that Shannon is to invest $67,000. 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 $45,000 to Black and $80,000 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 $160,000 and (2) net income of $205,000. Round answers to the nearest whole dollar.                  (1)                        (2) $160,000 $205,000 Plan   Black   Shannon   Black   Shannon a.            $                 $                           $                $ b.           $                 $                           $                 $ c.           $                 $                           $                 $ d.           $                $                            $                $ e.           $                $                             $               $ f.           $                 $

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Dividing Partnership Income

Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $201,000 and that Shannon is to invest $67,000. 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 $45,000 to Black and $80,000 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 $160,000 and (2) net income of $205,000. Round answers to the nearest whole dollar.

                 (1)                        (2)
$160,000 $205,000
Plan   Black   Shannon   Black   Shannon

a.            $                 $                           $                $

b.           $                 $                           $                 $

c.           $                 $                           $                 $

d.           $                $                            $                $

e.           $                $                             $               $

f.           $                 $                            $                $

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