Dividing Partnership Income

Morrison and Amato have decided to form a partnership. They have agreed that Morrison is to invest $150,000 and that Amato is to invest $50,000. Morrison is to devote one-half time to the business and Amato is to devote full time. The following plans for the division of income are being considered:

Equal division.

In the ratio of original investments.

In the ratio of time devoted to the business.

Interest of 12% on original investments and the remainder equally.

Interest of 12% on original investments, salary allowances of $30,000 to Morrison and $64,000 to Amato, and the remainder equally.

Plan (e), except that Amato 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 $105,000 and (2) net income of $180,000.