W. A. Kim and M. C. Love are forming a partnership for a beauty salon and plan to work full time in the firm. Kim will make an initial investment of $30,000 and Love $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 12 percent on the balances of their Capital accounts at the begin¬

ning of the year, and the remainder of the net income to be divided equally.

c. Salary allowances of $15,000 to Kim and $13,500 to Love 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 distributive shares of net income for each of the plans, assuming

(a) a net income of $45,000, and

(b) a net income of $26,000.

2. Which plan is the fairest? Give reasons for your opinion.