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 columnarheadings:

Transcribed Image Text:

$135,000 $60,000 Plan LaRue Small LaRue Small