Question

Return to question On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $55,000, $83,000, and $85,000, respectively. Over the next three years, the business reported net income and (loss) as follows: 2017 2018 2019 $ 95,000 67,000 (50,000) During this period, each partner withdrew cash of $18,000 per year. Krause invested an additional $7,000 in cash on February 9, 2018. At the time that the partnership was created, the three partners agreed to allocate all profits and losses according to a specified plan written as follows: • Each partner is entitled to interest computed at the rate of 10 percent per year based on the individual capital balances at the beginning of that year. • Because of prior work experience, Angela is entitled to an annual salary allowance of $18,000 per year and Diaz is entitled to an annual salary allowance of $11,500 per year. • Any remaining profit will be split as follows: Angela, 20 percent; Diaz, 35 percent; and Krause, 45 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela, 30 percent; Diaz, 45 percent; and Krause, 25 percent.