Black and Shannon have decided to form a partnership. They have agreed that Black is to invest $360,000 and that Shannon is to invest $120,000. Black is to devote one-half time to the business, and Shannon 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 6% on original investments and the remainder equally

e. Interest of 6% on original investments, salary allowances of $96,000 to Black and $168,000 to Shannon, and the remainder equally

f. Plan (e), except that Shannon is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the total salary allowances

Required: For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $276,000 and (2) net income of $480,000. Round answers to the nearest whole dollar.

Answer rating: 100% (QA)

To determine the division of net income under each plan for the given assumptions lets calculate the income allocation for Black and Shannon based on the different plans Plan a Equal division Under th... View the full answer