Instructions:
For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $150,000 and (2) net income of $90,000. Present the data in tabular form, using the following columnar headings: PLEASE SHOW THE BASIC CONCEPT ON HOW TO ANSWER A-F. WHAT IS THE BEST WAY TO SET UP THIS PROBLEM?
Phil Haddox and Russ French have decided to forma partnership. They have agreed that Haddox is to invest $120,000 and that French is to invest $180,000. Haddox is to devote full time to the business, and French 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 $60,000 to Haddox and $30,000 to French, and the remainder equally.
f. Plan (e), except that Haddox is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances.