The partnership's net income for the first year is $50,000. Nancy's capital balance is $83,000 and Betty's capital balance is $11,000 at the end of the year. Calculate the share of profit/loss to be allocated to Betty.
Nancy and Betty enter into a partnership agreement where they decide to share profits according to
the following rules:
(a) Nancy and Betty will receive salaries of $1700 and $14,500 respectively as the first allocation.
(b) The next allocation is based on 20% of each partner's capital balances.
(c) Any remaining profit or loss is to be allocated completely to Betty.
A) $18,300
B) $31,700
C) $3760
D) $16,100
B) $31,700
Explanation: The allocation of profit or loss can also be based on a combination of services, capital
balances, and stated ratios. A partnership might want to use this method if one partner contributes more
capital but the other partner devotes more time to the business.
Calculation:
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