E. R. Halprin and H. O. Jayson, consulting engineers, are form¬

ing a partnership. Both plan to work in the firm on a full-time basis. Halprin’s initial investment is $27,000, Jayson’s investment $45,000. They are considering the following plans for the division of net income:

a. Division in the same ratio as the balances of their Capital accounts.

b. Interest of 9 percent on the balances of their Capital accounts at the beginning of the year, and the remainder of the net income to be divided equally.

c. Salary allowances of $24,000 to Halprin and $20,000 to Jayson based on the value of their services, interest of 9 percent on the balances of their Capital accounts at the beginning of the year, and the remainder of the net income to be divided equally.
Instructions 1. Record the distribution of net income for each of the plans, assuming

(a) a net income of $56,000, and

(b) a net income of $32,000.
2. Which plan is the fairest? Give reasons for your opinion.