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For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $300,000 and (2) net income of $750,000. Round answers to the nearest whole dollar.

For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $300,000 and (2) net income of $750,000. Round answers to the nearest whole dollar.

FINANCIAL ACCOUNTING
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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Dividing partnership income Dahl and Westhoff have decided to form a partnership. They have agreed that Dahl is to invest $400,000 and that Westhoff is to invest $100,000. Dahl is to devote one-third time to the business, and Westhoff is to devote two-thirds 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 5% on original investments and the remainder equally e. Interest of 5% on original investments, salary allowances of $80,000 to Dahl and $160,000 to Westhoff, and the remainder equally f. Plan (e), except that Westhoff is also to be allowed a bonus of $50,000 if net income exceeds $200,000 Required: For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $300,000 and (2) net income of $750,000. Round answers to the nearest whole dollar. Plan a. b. C. d. e. f. (1) $300,000 Dahl 150,000 100,000 (1) $300,000 Westhoff 150,000 200,000 (2) $750,000 Dahl 375,000 $ 250,000 $ $ (2) $750,000 Westhoff 375,000 500,000
Transcribed Image Text:Dividing partnership income Dahl and Westhoff have decided to form a partnership. They have agreed that Dahl is to invest $400,000 and that Westhoff is to invest $100,000. Dahl is to devote one-third time to the business, and Westhoff is to devote two-thirds 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 5% on original investments and the remainder equally e. Interest of 5% on original investments, salary allowances of $80,000 to Dahl and $160,000 to Westhoff, and the remainder equally f. Plan (e), except that Westhoff is also to be allowed a bonus of $50,000 if net income exceeds $200,000 Required: For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $300,000 and (2) net income of $750,000. Round answers to the nearest whole dollar. Plan a. b. C. d. e. f. (1) $300,000 Dahl 150,000 100,000 (1) $300,000 Westhoff 150,000 200,000 (2) $750,000 Dahl 375,000 $ 250,000 $ $ (2) $750,000 Westhoff 375,000 500,000
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