Accounting 26th Edition by Carl Warren,James Reeve,Jonathan Duchac

Exercise 16

Dividing partnership income
Brittany Taylor and Piper Albright formed a partnership, investing $210,000 and $70,000 respectively. Determine their participation in the year's net income of $250,000 under each of the following independent assumptions: (a) no agreement concerning division of net income; (b) divided in the ratio of original capital investment; (c) interest at the rate of 5% allowed on original investments and the remainder divided in the ratio of 2:3; (d) salary allowances of $30,000 and $40,000, respectively, and the balance divided equally; (e) allowance of interest at the rate of 5% on original investments, salary allowances of $30,000 and $40,000, respectively, and the remainder divided equally.