Final answer:
After allocating Farmer's $70,000 salary from the partnership's net income of $135,000, the remaining $65,000 is divided equally, resulting in Farmer receiving a total of $102,500 and Taylor receiving $32,500 as their shares of the net income.
Step-by-step explanation:
To determine Farmer and Taylor's respective shares of the partnership's net income, we must first consider the terms outlined in their partnership agreement. According to the agreement, Farmer is to receive a $70,000 salary per year, while the rest of the net income is to be divided equally between Farmer and Taylor.
First, we allocate Farmer's salary:
- Net income: $135,000
- Farmer's salary: -$70,000
- Remaining income: $135,000 - $70,000 = $65,000
Next, we divide the remaining income equally:
- Farmer's share: $70,000 + ($65,000 / 2) = $70,000 + $32,500 = $102,500
- Taylor's share: $65,000 / 2 = $32,500
Therefore, the correct answer is e. $102,500; $32,500.