How the income should be allocated to the partners

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Reference no: EM132211184

Question: Ramer and Knox began a partnership by investing $82,000 and $123,000, respectively.

During its first year, the partnership earned $240,000. Prepare calculations showing how the $240,000 income should be allocated to the partners under each of the following three separate plans for sharing income and loss:

1. The partners failed to agree on a method to share income.


Ramer
Knox

2. The partners agreed to share income and loss in proportion to their initial investments. Net income is $240,000. (Do not round intermediate calculations.)

Fraction to Allocate Ramer	Ramer's Share of Income	Fraction to Allocate Knox	Knox's Share of Income	Total Income Allocated
				$0

3. The partners agreed to share income by granting a $66,000 per year salary allowance to Ramer, a $40,000 per year salary allowance to Knox, 10% interest on their initial capital investments, and the remaining balance shared equally. Net income is $240,000. (Enter all allowances as positive values. Enter losses as negative values.)

	Ramer	Knox	Total
Net Income
Salary allowances			0
Interest allowances			0
Total salary and interest
Balance of income
Balance allocated equally			0
Balance of income
Shares of the partners	$0	$0

Reference no: EM132211184

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