Question

Partners Cantor and Dickens have capital balances in a partnership of $160,000 and $240,000, respectively. They agree to share profits and losses as follows:

Cantor Dickens
As salaries $40,000 $48,000
As interest on capital at the beginning of the year 10% 10%
Remaining profits or losses 50% 50%
If income for the year was $120,000, what will be the distribution of income to Cantor?

A. $40,000
B. $52,000
C. $64,000
D. $56,000

Answer 1

Answer:

B. $52,000

Explanation:

Income fot the year                 $120,000

Less: C salaries                        $40,000

Less: D salaries                        $48,000

Less: Interest on Capital to C  $16,000   (10% * $160,000)

Less: Interest on Capital to C  $24,000  (10% * $240,000)

Loss                                           $8,000

Distribution of income

Salaries                                        $40,000

Add:  Interest on Capital             $16,000  (10% * $160,000)

Less: Remaining loss he share  ($4,000)  (50% * 80,00)0

Distribution of income to C       $52,000