Question

Partners Acer and Barr have capital balances in a partnership of $40,000 and $60,000, respectively. They agree to share profits and losses as follows: Acer Barr As salaries $10,000 $12,000 As interest on capital at the beginning of the year 10% 10% Remaining profits or losses 50% 50% If income for the year was $50,000, what will be the distribution of income to Barr

Answer 1

Answer:

$27,000

Explanation:

Acer's allocation of partnership's profits:

salary = $10,000

interest on capital = $40,000 x 10% = $4,000

remaining income = $18,000 x 50% = $9,000

total distribution = $23,000

Barr's allocation of partnership's profits:

salary = $12,000

interest on capital = $60,000 x 10% = $6,000

remaining income = $18,000 x 50% = $9,000

total distribution = $27,000