Dividing Partnership Income

Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $153,000 and that Shannon is to invest $51,000. 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:

1. Equal division.
2. In the ratio of original investments.
3. In the ratio of time devoted to the business.
4. Interest of 6% on original investments and the remainder equally.
5. Interest of 6% on original investments, salary allowances of $50,000 to Black and $80,000 to Shannon, and the remainder equally.
6. 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.

Required:

For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $151,000 and (2) net income of $260,000. Round answers to the nearest whole dollar.

	(1)				(2)
	$151,000				$260,000
Plan		Black		Shannon		Black		Shannon
a.
b.
c.
d.
e.
f.