Bob and Dan have decided to establish a partnership. Bob contributes $51,000 in cash, Dan contributes 101,000 cash. They are evaluating two plans for a profit and loss sharing agreement:

Plan A:

Bob to receive a salary of 16,000 annually, the balance to be divided between Bob and Dan according to their opening capital balance ratios.

Plan B.

Bob to receive a salary of 13,000 annually. Bob and Dan to receive 10% interest per year on their opening capital balances, and the balance of profit or loss to be split equally.

Required:

1. Calculate the division under each plan in the following schedule, assuming A: a profit of 65,000 per year and B. a loss of 30,000 per year.

2. Comment on the pros and cons of each plan.