Reference no: EM131749263

Problem - Dividing Partnership Income:

Desmond Drury and Ty Wilkins have decided to form a partnership. They have agreed that Drury is to invest $44,700 and that Wilkins is to invest $104,300. Drury is to devote full time to the business, and Wilkins is to devote one-half time. The following plans for the division of income are being considered:

1. Equal division.

2. In the ratio of original investments.

3. In the ratio of time devoted to the business.

4. Interest of 10% on original investments and the remainder in the ratio of 3:2.

5. Interest of 10% on original investments, salary allowances of $101,400 to Drury and $50,700 to Wilkins, and the remainder equally.

6. Plan (e), except that Wilkins 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 $447,000 and (2) net income of $196,800.