Accounting

L&E Consulting has four partners: Jodi, Rachel, Tyler, and Chad. Its budgeted net income for this period is $90,000. The partners are currently debating how the company’s net income should be divided among themselves. The partners are considering the following four alternatives:

1. Divide net income in the ratios of the partners’ average capital balances during the year.

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2. Give a $10,000 salary allowance to Jodi and a $5,000 salary allowance to Rachel and divide the remainder in the ratios of their average capital balances.

3. Give each partner an interest allowance equal to 10 percent of his or her average capital balance during the year and divide the remainder equally among the partners.

4. Divide the net income among Jodi, Rachel, Tyler, and Chad—25 percent, 10 percent, 35 percent, and 30 percent, respectively.

The average capital balances for Jodi, Rachel, Tyler, and Chad during the past year were $20,000, $10,000, $30,000, and $40,000, respectively.

Required: Use a computer spreadsheet package.

A. Determine each partner’s share of net income using alternative 1.

B. Determine each partner’s share of net income using alternative 2.

C. Determine each partner’s share of net income using alternative 3.

D. Determine each partner’s share of net income using alternative 4.

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