ACCOUNTING
Desmond Drury and Ty Wilkins have decided to form a partnership. They have agreed that Drury is to invest $20,000 and that Wilkins is to invest $30,000. 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:
a. Equal division.
b. In the ratio of original investments.
c. In the ratio of time devoted to the business.
d. Interest of 10% on original investments and the remainder in the ratio of 3:2.
e. Interest of 10% on original investments, salary allowances of $34,000 to Drury and $17,000 to Wilkins, and the remainder equally.
f. Plan (e), except that Drury is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances.
Instructions
For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $150,000 and (2) net income of $66,000. Present the data in tabular form, using the following column headings:
$150,000 $66,000
Plan Drury Wilkins Drury Wilkins
Check: 1. f. Drury net income, $92,900
Click here for the SOLUTION
