Phil LaRue and Russ Small have decided to form a partnership. They have agreed that LaRue is to invest $16,000 and that Small is to invest $24,000. LaRue is to devote full time to the business, and Small 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 $30,000 to LaRu and $15,000 to Small, and the remainder equally.
f. Plan (e), except that LaRue is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances.
Instructions
For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $135,000 and (2) net income of $60,000. Present the data in tabular form, using the following columnar headings:
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$135,000 |
$60,000 |
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Plan |
LaRue |
Small |
LaRue |
Small |