Larson and Alvarez have decided to form a partnership. They have agreed that Larson is to invest $150,000 and that Alvarez is to invest $50,000. Larson is to devote one-half time to the business and Alvarez is to devote full time. The following plans for the division of income are being considered:
a. Equal division
b. In the ratio of original investments
c. In the ratio of time devoted to the business
d. Interest of 12% on original investments and the remainder equally.
e. Interest of 12% on original investments, salary allowances of $32,000 to Larson and $64,000 to Alvarez, and the remainder equally
f. Plan (e), except that Alvarez is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances.
Instructions:
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. Present the data in tabular form, using the following columnar headings:$105,000 $180,000Plan Larson Alvarez Larson Alvarez