E 4. Elijah Samuels and Tony Winslow agreed to form a partnership. Samuels contributed $200,000 in cash, and Winslow contributed assets with a fair market value of $400,000. The partnership, in its initial year, reported net income of $120,000. Calculate the distribution of the first year\'s income to the partners under each of the following conditions: 1. Samuels and Winslow failed to include stated ratios in the partnership agreement. 2. Samuels and Winslow agreed to share income and losses in a 3:2 ratio. 3. Samuels and Winslow agreed to share income and losses in the ratio of their original investments. 4. Samuels and Winslow agreed to share income and losses by allowing 10 percent interest on original investments and sharing any remainder equally.
Solution
1. When there is no stated ratio then profit distributed equally
Share of Samuels = 120000x1/2= 60000
Share of winslow= 120000x1/2 = 60000
2. Share of Samuels=Â Â 120000x 3/5 = 72000
Share of winslow= 120000x2/5 = 48000
3. Value of investments= Samuels (200000) + Winslow (400000)= 600000
Share of samuels = 120000x200000/600000 = 40000
Share of winslow = 120000x 400000/600000= 80000
4. Income after interest on investments = 120000- 600000x10%= 60000
Share of samuels = 60000x1/2 = 30000
Share of winslow = 60000x1/2 =30000
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E 4- Elijah Samuels and Tony Winslow agreed to form a partnership- Sam.docx
1. E 4. Elijah Samuels and Tony Winslow agreed to form a partnership. Samuels contributed
$200,000 in cash, and Winslow contributed assets with a fair market value of $400,000. The
partnership, in its initial year, reported net income of $120,000. Calculate the distribution of the
first year's income to the partners under each of the following conditions: 1. Samuels and
Winslow failed to include stated ratios in the partnership agreement. 2. Samuels and Winslow
agreed to share income and losses in a 3:2 ratio. 3. Samuels and Winslow agreed to share income
and losses in the ratio of their original investments. 4. Samuels and Winslow agreed to share
income and losses by allowing 10 percent interest on original investments and sharing any
remainder equally.
Solution
1. When there is no stated ratio then profit distributed equally
Share of Samuels = 120000x1/2= 60000
Share of winslow= 120000x1/2 = 60000
2. Share of Samuels=Â Â 120000x 3/5 = 72000
Share of winslow= 120000x2/5 = 48000
3. Value of investments= Samuels (200000) + Winslow (400000)= 600000
Share of samuels = 120000x200000/600000 = 40000
Share of winslow = 120000x 400000/600000= 80000
4. Income after interest on investments = 120000- 600000x10%= 60000
Share of samuels = 60000x1/2 = 30000
Share of winslow = 60000x1/2 =30000
