Answer:
Please see the solution for Tyler Hawes and Piper Albright Partnership below:
Explanation:
(a) Compute the Division of Net Income:
Division of Net Income = Net Income x 1/2
Tyler = $290,000 x 1/2 = $145,000
Piper = $290,000 x 1/2 = $145,000
(b) Compute the ratio of Capital Investment for Tyler and Piper :
Ratio of Capital Investment = $210,000 : $70,000 = 21 : 7
Tyler = Net Income x Share Ratio
Tyler = $290,000 x 21 / 28
Tyler = $290,000 x 0.75
Tyler = $217,500
Piper = $290,000 x 7 / 28
Piper = $290,000 x 0.25
Piper = $72,500
(c) Calculate the Interest Calculation in the original contribution and remaining to be in a ratio 2:3
Interest Calculation = Original Capital x Interest Rate
Tyler = $210,000 x 5% = $10,500
Piper = $70,000 x 5% = $3,500
Remaining Balance = $290,000 - $10,500 - $3,500 = $276,000
Remaining Balance divided in the ratio 2:3
Tyler = $276,000 x 2 / 5 = $110,400
Piper = $276,000 x 3 / 5 = $165,600
Total Interest Tyler = $10,500 + 110,400 = $120,900
Total Interest Piper = $3,500 + $165,600 = $169,100
(d) Salary Allowances and the remainder to be distributed equally calculation:
Remaining Balance = $290,000 - $36,000 - $45,000 = $209,000
Remaining Balance divided equally
Tyler = $209,000 x 1 / 2 = $104,500
Piper = $209,000 x 1 / 2 = $104,500
(e) Calculation of Interest Allowance and Salary Allowance and distribute remainder equally:
Interest Calculation = Original Capital x Interest Rate
Tyler = $210,000 x 5% = $10,500
Piper = $70,000 x 5% = $3,500
Balance after Interest Calculation = $290,000 - $10,500 - $3,500
Balance after Interest Calculation = $276,000
Balance after Salary Allowance
Remaining Balance = $276,000 - $36,000 - $45,000 = $195,000
Remaining Balance divided equally
Tyler = $195,000 x 1 / 2 = $97,500
Piper = $195,000 x 1 / 2 = $97,500
