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Suze and Bess formed the Suzy B Company by making capital contributions of $130,000 and $195,000 respectively. They predict annual partnership income of $230,000 and are considering the following alternative plans of sharing income and loss:
(a) in the ratio of their initial capital investments; or
(b) salary allowances of $40,000 to Suze and $35,000 to Bess; interest allowances of 12% on their initial capital investments; and the balance shared equally. Assuming that both partners put about the same amount of time into the business, which method of allocating income would be best?
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