a. Equal division.
b. In the ratio of original investments.
c. In the ratio of time devoted to the business.
d. Interest of 12% on original investments and the remainder equally.
e. Interest of 12% on original investments, salary allowances of $28,000 to Lawford and $60,000 to Delgado, and the remainder equally.
f. Plan (e), except that Delgado is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances.
Instructions
For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $90,000 and (2) net income of $135,000. Present the data in tabular form, using the following columnar headings:
$90,000 $135,000
Plan Lawford Delgado Lawford Delgado
Answer:
(1) (2)
$90,000 $135,000
Plan Lawford Delgado Lawford Delgado
a. ………………………………………$45,000 $45,000 $ 67,500 $67,500
b. …………………………………… 67,500 22,500 101,250 33,750
c. ……………………………………… 30,000 60,000 45,000 90,000
d. …………………………………… 48,600 41,400 71,100 63,900
e. ……………………………………… 32,600 57,400 55,100 79,900
f. …………………………………… 32,400 57,600 50,400 84,600
Details:
$90,000 $135,000
Lawford Delgado Lawford Delgado
a. Net income (1:1)………………… $45,000 $45,000 $ 67,500 $67,500
b. Net income (3:1)………………… $67,500 $22,500 $101,250 $33,750
c. Net income (1:2)………………… $30,000 $60,000 $ 45,000 $90,000
d. Interest allowance……………… $10,800 $ 3,600 $ 10,800 $ 3,600
Remaining income (1:1)………… 37,800 37,800 60,300 60,300
Net income……………………… $48,600 $41,400 $ 71,100 $63,900
e. Interest allowance……………… $10,800 $ 3,600 $ 10,800 $ 3,600
Salary allowance………………… 28,000 60,000 28,000 60,000
Excess of allowances over
income (1:1)…………………… (6,200) (6,200)
Remaining income (1:1)………… 16,300 16,300
Net income……………………… $32,600 $57,400 $ 55,100 $79,900
f. Interest allowance……………… $10,800 $ 3,600 $ 10,800 $ 3,600
Salary allowance………………… 28,000 60,000 28,000 60,000
Bonus allowance……………… 400*
Excess of allowances over
income (1:1)……………………… (6,400) (6,400)
9,400**
Remaining income (1:1)……… 11,600 11,600
Net income……………………… $32,400 $57,600 $ 50,400 $84,600
* 20% × [$90,000 – ($28,000 + $60,000)]
** 20% × [$135,000 – ($28,000 + $60,000)]