Partners A and B have capital balances in a partnership of 40,000 and 60,000 res
ID: 2547095 • Letter: P
Question
Partners A and B have capital balances in a partnership of 40,000 and 60,000 respectively. They agree to share the profits and losses as follows: Salary A=10000 B=12000 Interest on capital at the begining of the year A=10% B=10%, Remaining profits or losses A=50% B=50%
1a) if net loss for the year was 2000 what would the distribution be for partner B?
1b) if income for the year was 50000 what would the distribution for partner B be?
1c) if income for the year was 30000 what would the distribution for partner A be?
Explanation / Answer
1A distribution be for partner B = Salary + Interest - Loss
= $ 12,000 + ($ 60,000 * 10/100) - 50% of Loss $ 2,000
= $ 12,000 + $ 6,000 - $ 1,000
= $ 17,000
1B. distribution be for partner B = Salary + Interest + Profit
= $ 12,000 + ($ 60,000 * 10/100) + 50% of Profit ($ 50,000 - $ 22,000 - $ 10,000)
= $ 12,000 + $ 6,000 + $ 9,000
= $ 27,000
1C distribution be for partner A = Salary + Interest - Loss
= $ 10,000 + ($ 40,000 * 10/100) - 50% of Loss ($ 30,000 - $ 22,000 - $ 10,000)
= $ 10,000 + $ 4,000 - $ 1,000
= $ 13,000