EX 12-4 Dividing partnership income

Determine the income participation of Murphy and Drake, according to each of the five assumptions as to income division listed in Exercise 12-3, if the year’s net income is $126,000.


Answer:

Murphy Drake
a. …………………………………………………………………… $63,000 $63,000
b. …………………………………………………………………… 94,500 31,500
c. …………………………………………………………………… 56,700 69,300
d. …………………………………………………………………… 58,000 68,000
e. …………………………………………………………………… 62,500 63,500
Details: Murphy Drake Total
a. Net income (1:1)……………………………… $63,000 $63,000 $126,000
b. Net income (3:1)……………………………… $94,500 $31,500 $126,000
c. Interest allowance…………………………… $13,5001 $ 4,5002 $ 18,000
Remaining income (2:3)…………………… 43,200 64,800 108,000
Net income…………………………………… $56,700 $69,300 $126,000
d. Salary allowance…………………………… $40,000 $50,000 $ 90,000
Remaining income (1:1)…………………… 18,000 18,000 36,000
Net income…………………………………… $58,000 $68,000 $126,000
e. Interest allowance…………………………… $13,5001 $ 4,5002 $ 18,000
Salary allowance……………………………… 40,000 50,000 90,000
Remaining income (1:1)…………………… 9,000 9,000 18,000
Net income…………………………………… $62,500 $63,500 $126,000
1
$270,000 × 5%
2
$90,000 × 5%