Determine the income participation of Murphy and Drake, according to each of the five assumptions as to income division listed

Determine the income participation of Murphy and Drake, according to each of the five assumptions as to income division listed in Exercise 12-3, if the year’s net income is $126,000.


Answer:

























Murphy Drake
a. …………………………………………………………………… $63,000 $63,000
b. …………………………………………………………………… 94,500 31,500
c. …………………………………………………………………… 56,700 69,300
d. …………………………………………………………………… 58,000 68,000
e. …………………………………………………………………… 62,500 63,500
Details: Murphy Drake Total
a. Net income (1:1)……………………………… $63,000 $63,000 $126,000
b. Net income (3:1)……………………………… $94,500 $31,500 $126,000
c. Interest allowance…………………………… $13,5001 $ 4,5002 $ 18,000
Remaining income (2:3)…………………… 43,200 64,800 108,000
Net income…………………………………… $56,700 $69,300 $126,000
d. Salary allowance…………………………… $40,000 $50,000 $ 90,000
Remaining income (1:1)…………………… 18,000 18,000 36,000
Net income…………………………………… $58,000 $68,000 $126,000
e. Interest allowance…………………………… $13,5001 $ 4,5002 $ 18,000
Salary allowance……………………………… 40,000 50,000 90,000
Remaining income (1:1)…………………… 9,000 9,000 18,000
Net income…………………………………… $62,500 $63,500 $126,000
1
$270,000 × 5%
2
$90,000 × 5%