a. The partnership of Katie and Leon began with the partners investing $5,000 and $3,000, respectively. At the end of the first year, the partnership earned net income of $8,600. Under each of the following independent situations, calculate how much of the $8,600 each is entitled to:
Situation 1: No agreement on how income was to be shared.
Situation 2: Katie and Leon share income based on the beginning-of-year investment ratio.
Situation 3: Salary allowance of $2,700 to Katie and $2,320 to Leon. Ten percent interest on beginning year’s investment. Remainder split equally.
b. In Situation 3, what would the earnings to each partner be if net income were $5,000?