Dylan Howell and Demond Nickles have decided to form a partnership. They have agreed that Howell is to invest $50,000 and that Nickles is to invest $75,000. Howell is to devote full time to the business, and Nickles is to devote one-half time. The following plans for the division of income are being considered: Equal division In the ratio of original investments In the ratio of time devoted to the business Interest of 10% on original investments and the remainder in the ratio of 3:2 Interest of 10% on original investments, salary allowances of $38,000 to Howell and $19,000 to Nickles, and the remainder equally Plan (e), except that Howell is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances Instructions For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $420,000 and (2) net income of $150,000. Pres
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Dylan Howell and Demond Nickles have decided to form a
-
Equal division
-
In the ratio of original investments
-
In the ratio of time devoted to the business
-
Interest of 10% on original investments and the remainder in the ratio of 3:2
-
Interest of 10% on original investments, salary allowances of $38,000 to Howell and $19,000 to Nickles, and the remainder equally
-
Plan (e), except that Howell is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances
Instructions
-
For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $420,000 and (2) net income of $150,000. Present the data in tabular form, using the following columnar headings:
$ 420,000 $ 420,000 $ 150,000 $ 150,000 Plan Howell Nickels Howell Nickels
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 8 images
