Question:
1. Garland and Driscoe have decided to form a partnership. They have agreed that Garland is to invest $200,000 and that Driscoe is to invest $100,000. Garland is to devote one-half time to the business and Driscoe 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 12% on original investments and the remainder equally.
e. Interest of 12% on original investments, salary allowances of $30,000 to Garland and $60,000 to Driscoe, and the remainder equally.
f. Plan (e), except that Driscoe is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances.
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 $240,000. Present the data in tabular form, using the following columnar headings:
$90,000 $240,000
Plan Garland Driscoe Garland Driscoe