Applying the ratio based on investment method,compute Taylor and Timmy's share of net income if Taylor invested $400,000 and Timmy invested $600,000.Net income was $75,000.
A)Taylor,$15,000;Timmy,$60,000
B)Taylor,$37,500;Timmy,$37,500
C)Taylor,$30,000;Timmy,$45,000
D)None of these answers is correct.

Question

Quizplus · Accepted Answer

To determine each person's share of net income using the ratio based on investment method, we need to add up the total investment made by both, which is $1,000,000 in this case.

Next, we need to calculate the percentage of the investment made by each person by dividing their investment by the total investment.

For Taylor: 
Percentage of investment = $400,000 / $1,000,000 = 0.4 or 40%

For Timmy: 
Percentage of investment = $600,000 / $1,000,000 = 0.6 or 60%

Finally, we need to apply these percentages to the net income to determine each person's share:

For Taylor: 
Share of net income = 0.4 x $75,000 = $30,000

For Timmy: 
Share of net income = 0.6 x $75,000 = $45,000

Therefore, Taylor's share of net income is $30,000 and Timmy's share is $45,000, making answer choice C the correct answer.

Applying the Ratio Based on Investment Method,compute Taylor and Timmy's