Kate DeLeo and Joe Desmond decided to form a partnership on January 1. DeLeo invested $50,000 and Desmond invested $30,000. On December 31, the end of the fiscal year, a net income of $100,000 was earned. Determine the amount of net income that DeLeo and Desmond would receive under each of the following independent assumptions: Net income $fill in the blank 1 Income to be allocated DeLeo Desmond Total a. There is no agreement concerning the distribution of net income. $fill in the blank 2 $fill in the blank 3 $fill in the blank 4 b. Each partner is to receive 10% on their original investment, and the remainder divided equally. $fill in the blank 5 $fill in the blank 6 $fill in the blank 7 c. DeLeo and Desmond are to receive a salary allowance of $35,000 and $45,000 respectively, and the remainder divided equally. $fill in the blank 8 $fill in the blank 9 $fill in the blank 10 d. Each partner is to receive 10% on their original investment, DeLeo and Desmond are to receive a salary allowance of $30,000 and $40,000 respectively, and the remainder divided as follows: 60% to DeLeo and 40% to Desmond

A. Profit sharing of Net income for both the Kate Deleo and Joe Desmond will be same because there is no agreement concerning the distribution of net income.  

B. both partners will get 46000 each.

C. 10000 will be distributed to both the partners.

D.

60% of 22000 = 13200 paid to Deleo

40% of 22000 = 8800 paid to Desmond

Explanation:

Following are the independent assumptions

A. There is no agreement concerning the distribution of net income.

B. Each partner is to receive 10% on their original investment, and the remainder divided equally.

C. DeLeo and Desmond are to receive a salary allowance of $35,000 and $45,000 respectively, and the remainder divided equally.

D. Each partner is to receive 10% on their original investment, DeLeo and Desmond are to receive a salary allowance of $30,000 and $40,000 respectively, and the remainder divided as follows: 60% to DeLeo and 40% to Desmond.

Solution:

A. Profit sharing of Net income for both the Kate Deleo and Joe Desmond will be same because there is no agreement concerning the distribution of net income.  

B.

Kate Deleo Invested = 50,000

Desmond Invested = 30,000

End of Fiscal Year Net Income = 100,000

10% of Kate Investment = 50,000 x 10% = 5000

10% of Desmond Investment = 30,000 x 10% = 3000

Total investment 10% = 8000

So.

Net Income = 100000 - 8000 = 92000

Divide this 92000 in 2 = 96000/2 = 46000

So, Remaining net income is = 46000 each.

Hence, both partners will get 46000 each.  

C.

Salary allowance for Kate Deleo = 35000

Salary allowance for Desmond = 45000

Total Salary Allowance = 80000

Net income at the end of fiscal year = 100000

So, subtract the Total Salary Allowance from 100000 and divide the answer into 2.

Remaining = 100000-80000 = 20000

Remaining amount = 20000/2 = 10000

So,

10000 will be distributed to both the partners.

D.

Kate Deleo Invested = 50,000

Desmond Invested = 30,000

End of Fiscal Year Net Income = 100,000

10% of Kate Investment = 50,000 x 10% = 5000

10% of Desmond Investment = 30,000 x 10% = 3000

Total investment 10% = 8000

Salary allowance for Kate Deleo = 30000

Salary allowance for Desmond = 40000

Total Salary Allowance = 70000

Net Income at the end of fiscal year = 100000

Subtract 8000 and 70000 from the net income.

100000-70000-8000 = 22000

Now, Deleo will get 60% of 22000

and Desmond will get 40% of 22000

60% of 22000 = 13200 paid to Deleo

40% of 22000 = 8800 paid to Desmond