Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $360,000 and that Shannon is to invest $120,000. Black is to devote one-half time to the business, and Shannon is to devote full time. The following plans for the division of income are being considered:

Equal division

In the ratio of original investments

In the ratio of time devoted to the business

Interest of 6% on original investments and the remainder equally

Interest of 6% on original investments, salary allowances of $96,000 to Black and $168,000 to Shannon, and the remainder equally

Plan (e), except that Shannon is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances

INSTRUCTIONS

For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $276,000 and (2) net income of $480,000. Present the data in tabular form, using the following columnar headings:

 $276,000 $480,000
Plan Black Shannon Black Shannon