Part 1:

Karen Smith and Abby Jones formed a partnership, investing $225,000 and $150,000, respectively. Determine their participation in the years net income of $376,000 under each of the following independent assumptions. Please show your calculations.

a. No agreement concerning division of net income.

b. Divided in the ratio of original capital investment.

c. Interest at the rate of 4% allowed on original investments and the remainder divided in the ratio of 4:1.

d. Salary allowances of $40,000 and $70,000 respectively, and the remainder divided equally.

e. Allowance of interest at the rate of 3% on original investments, salary allowances of $65,000 and $75,000 respectively and the remainder divided equally.

Part 2:

Using each of the five assumptions as to income division used in Part 1, determine the income participation of Smith and Jones if the year's income was $204,000.