EX 12-4 Dividing partnership income

Determine the income participation of Wyatt and Truett, according to each of the five assumptions as to income division listed in Exercise 12-3 if the year’s net income is $160,000.

Answer:

 Wyatt   Truett   a. ........................................................................................ $ 80,000 $80,000 b. ........................................................................................  120,000  40,000 c. ........................................................................................  76,320  83,680 d. ........................................................................................  70,000  90,000 e. ........................................................................................  78,800  81,200  
Details     Wyatt   Truett   Total   a. Net income (1:1)............................................... $80,000 $80,000 $160,000   
b. Net income (3:1)............................................... $120,000 $40,000 $160,000   
c. Interest allowance ........................................... $26,400 $ 8,800 $ 35,200  Remaining income (2:3)..................................  49,920  74,880  124,800  Net income....................................................... $76,320 $83,680 $160,000   
d. Salary allowance.............................................. $50,000 $70,000 $120,000  Remaining income (1:1)..................................  20,000  20,000  40,000  Net income....................................................... $70,000 $90,000 $160,000   
e. Interest allowance ........................................... $26,400 $ 8,800 $ 35,200  Salary allowance..............................................  50,000  70,000  120,000  Remaining income (1:1)..................................  2,400  2,400  4,800  Net income....................................................... $78,800 $81,200 $160,000

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