Lange and Lopez have decided to form a partnership. They have agreed that Lange is to invest $240,000 and that Lopez is to invest $80,000. Lange is to devote one-half time to the business and Lopez 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 $35,000 to Lange and $70,000 to Lopez, and the remainder equally.

f. Plan (e), except that Lopez 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 $114,000

(2) Net income of $210,000. Present the data in tabular form, using the following columnarheadings:

Transcribed Image Text:

$114,000 S210,000 Plan Lange Lopez Lange Lopez