Fred and Barney started a partnership. During Year 1, Fred invested $20,000 in the business and Barney invested $32,000. The partnership agreement called for each partner to receive an annual distribution equal to 15% of his capital contribution. Any further earnings were to be retained in the business and divided equally between the partners. The partnership reported net income of $38,000 during Year 1. How will the $38,000 of net income be split between Fred and Barney respectively? (Hint: Consider both the cash withdrawals and allocation of remaining income.)FredBarney
A.
| $ | 18,100 | $ | 19,900 |
B.
| $ | 20,500 | $ | 17,500 |
C.
| $ | 19,000 | $ | 19,000 |
D.
| $ | 20,000 | $ | 18,000 |
Answer: A
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