How would you advise the partners in developing a method for dividing income?
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CP 12-4 Dividing
Terry Willard and Jasmine Hill decide to form a partnership. Willard will contribute $300,000 to the partnership, while Hill will contribute only $30,000. However, Hill will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In contrast, Willard will only work five hours per week for the partnership. The two partners are attempting to determine a formula for dividing partnership net income. Willard believes the partners should divide income in the ratio of 7:3, favoring Willard, since Willard provides the majority of the capital. Hill believes the income should be divided 7:3, favoring Hill, since Hill provides the majority of effort in running the partnership business.
How would you advise the partners in developing a method for dividing income?
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- Terry Willard and Jasmine Hill decide to form a partnership. Willard will contribute $300,000 to the partnership, while hill will contribute only $30,000. However, Hill will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In contrast, Willard will only work five hours per week for partnership. The two partners are attempting to determine a formula for dividing partnership net income. Willard believes the partners should divide income in the ratio of 7:3, favoring Willard, since Willard provides the majority of the capital. Hill believes the income should divided 7:3, favoring Hill, since Hill provides the majority of effort in running the partnership business. How would you advise the partners in developing a method for diving income?EXERCISE 6-12. Problem Solving 3. Alger is trying to decide whether to accept a salary allowance of P80,000 or a salary allowance of P50,000 plus a bonus of 10% of net income after salary and bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are estimated to be P200,000. You are required to determine the amount of partnership net income that would be necessary so that Alger would be indifferent between the two.Problem 32: Pam and Drix formed a partnership in 20x1 to operate a bookkeeping services. Pam contributed the initial capital while Drix managed the business. With the assistance of their consultants, they have arrived at the following agreement: 1. Each partner is allowed to withdraw P1,000 in cash from business every month. Any withdrawal in excess of that figure will be accounted for as a direct reduction to the partners' capital balance. 2. Partnership profits and losses will be allocated each year according to the following plan: Interest of 15% will be accrued by each partner based on the monthly average capital balance for the year. As the managing partner, Drix is to receive credit for a bonus equal to 20% of the year's net income. Any remaining profit or loss will be divided equally between the two partners. Pam and Drix begin the year of 20x1 with capital balances of P150,000 and P30,000, respectively. On April 1 of the year, Pam invested additional P8,000 cash in the…
- Task 2: X and Y share income of their partnership in a 2:3 ratio. X and Y receive salaries of $18,000 and $12,000, respectively. a) How would they share a net income of $30,000 (before salaries are distributed)? b) You should make the journal entry for this activity. c) In which ways will the results in a) and b) be changed if the ratio is 1:4?Terry Willard and Jasmine Hill decide to form a partnership. Willard will contribute $300,000 to the partnership, while Hill will contribute only $30,000. However, Hill will be responsible for running the day-to-day operations of the partnership, which are anticipated to require about 45 hours per week. In contrast, Willard will only work five hours per week for the partnership. The two partners are attempting to determine a formula for dividing partnership net income. Willard believes the partners should divide income in the ratio of 7:3, favoring Willard, since Willard provides the majority of the capital. Hill believes the income should be divided 7:3, favoring Hill, since Hill provides the majority of effort in running the partnership business.How would you advise the partners in developing a method for dividing income?On December 31, 2014, LBM Partnership’s accounts show the following. Answer the following questions under the different scenarios. Partner Drawings Capital Lisa $23,000 $48,000 Bart 14,000 30,000 Maggie 10,000 25,000 Scenario1: Net income for the year is $30,000. Income is shared 60% to Lisa, 30% to Bart, and 10% to Maggie. How much is each partner’s share of the income? Lisa Bart Maggie Scenario 2: Net income was $60,000 for the year. Lisa and Bart are each given a $15,000 salary allowance. The remainder is shared equally. Prepare a schedule showing the division of net income. Lisa Bart Maggie Total Salary allowance Remaining income Total division of net income Scenario 3: Net income was $24,000 for the year. Each partner is given a 10% interest on beginning capital balances. Lisa is given a $10,000 salary allowance and $5,000 is…
- Can I please get help with this practice question 7.13 Watts and Lyon are forming a partnership. Watts invests $40,000 and Lyon invests $60,000. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $24,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $24,000 per year to Lyon, 9% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $16,000 net loss; Year 2, $40,000 net income; and Year 3, $66,667 net income. . Note: Enter all allowances as positive values. Enter losses and capital deficits, if any, as…9. JJ&T Partnership has three partners, James Small, Josh Platt, and Turner Lyle, who allocate net income according to the services provided and any remainder equally. The partnership agreement states that James and Turner will provide services for $2,500 a month while Josh will provide services for $3,750. For the fiscal year ending December 31, 2015, the partnership earned $192,600. Determine the amount allocated to each partner and prepare the journal entry to record the division of net income.Dividing Partnership Income Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $249,000 and that Shannon is to invest $83,000. 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: a. Equal division. b. In the ratio of original investments. c. In the ratio of time devoted to the business. d. Interest of 5% on original investments and the remainder equally. e. Interest of 5% on original investments, salary allowances of $55,000 to Black and $85,000 to Shannon, and the remainder equally. f. 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 $142,000 and (2) net income of $230,000. Round answers to the nearest whole dollar. (1) (2)…
- Dividing Partnership Income Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $201,000 and that Shannon is to invest $67,000. 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: a. Equal division. b. In the ratio of original investments. c. In the ratio of time devoted to the business. d. Interest of 6% on original investments and the remainder equally. e . Interest of 6% on original investments, salary allowances of $45,000 to Black and $80,000 to Shannon, and the remainder equally. f. 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 $160,000 and (2) net income of $205,000. Round answers to the nearest whole dollar.…Dividing Partnership Income Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $201,000 and that Shannon is to invest $67,000. 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: a. Equal division. b. In the ratio of original investments. c. In the ratio of time devoted to the business. d. Interest of 6% on original investments and the remainder equally. e. Interest of 6% on original investments, salary allowances of $45,000 to Black and $80,000 to Shannon, and the remainder equally. f. 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 $160,000 and (2) net income of $205,000. Round answers to the nearest whole dollar. ANSWER…Dividing Partnership Income Dylan Howell and Demond Nickles have decided to form a partnership. They have agreed that Howell is to invest $50,000 and that Nickles is to invest $75,000. Howell is to devote full time to the business, and Nickles is to devote one-half time. The following plans for the division of income are being considered: a. Equal division. b. In the ratio of original investments. c. In the ratio of time devoted to the business. d. Interest of 10% on original investments and the remainder in the ratio of 3:2. e. Interest of 10% on original investments, salary allowances of $38,000 to Howell and $19,000 to Nickles, and the remainder equally. f. Plan (e), except that Howell 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 $420,000 and (2) net income of $150,000. (1) (2) $420,000…