Ramer and Knox began a partnership by investing $60,000 and $90,000, respectively. During its first year, the partnership earned $160,000. Prepare calculations showing how the $160,000 income is allocated under each separate plan for sharing income and loss. 1. The partners did not agree on a plan and therefore share income equally. 2. The partners agreed to share income and loss in proportion to their initial investments. 3. The partners agreed to share income by giving a $50,000 per year salary allowance to Ramer, a $40,000 per year salary allowance to Knox, 10% interest on their initial capital investments, and the remaining balance shared equally.
Ramer and Knox began a partnership by investing $60,000 and $90,000, respectively. During its first year, the partnership earned $160,000. Prepare calculations showing how the $160,000 income is allocated under each separate plan for sharing income and loss. 1. The partners did not agree on a plan and therefore share income equally. 2. The partners agreed to share income and loss in proportion to their initial investments. 3. The partners agreed to share income by giving a $50,000 per year salary allowance to Ramer, a $40,000 per year salary allowance to Knox, 10% interest on their initial capital investments, and the remaining balance shared equally.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Ramer and Knox began a
the partnership earned $160,000. Prepare calculations showing how the $160,000 income is allocated
under each separate plan for sharing income and loss.
1. The partners did not agree on a plan and therefore share income equally.
2. The partners agreed to share income and loss in proportion to their initial investments.
3. The partners agreed to share income by giving a $50,000 per year salary allowance to Ramer, a
$40,000 per year salary allowance to Knox, 10% interest on their initial capital investments, and the
remaining balance shared equally.
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