DividingPartnershipIncome

Morrison and Greene have decided to form a partnership. They have agreed that Morrison is to invest $177,000 and that Greene is to invest $59,000. Morrison is to devote one-half time to the business, and Greene 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 5% on original investments and the remainder equally
5. Interest of 5% on original investments, salary allowances of $50,000 to Morrison and $80,000 to Greene, and the remainder equally
6. Plan (e), except that Greene 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, determining the division of the net income under each of the following assumptions: (1) net income of $157,000 and (2) net income of $215,000.

(1) (2)

$157,000 $215,000

Plan Morrison Greene Morrison Greene

a. $ $ $ $

b. $ $ $ $

c. $ $ $ $

d. $ $ $ $

e. $ $ $ $

f. $ $ $ $