Shelby and Mortonson formed a partnership with capital
contributions of $300,000 and $400,000, respectively. Their
partnership agreement calls for Shelby to receive a $60,000 per
year salary. Also, each partner is to receive an interest allowance
equal to 10% of a partner's beginning capital investments. The
remaining income or loss is to be divided equally. If the net
income for the current year is $135,000, then Shelby and
Mortonson's respective shares are:
Select one:
a. $57,857; $77,143.
b. $90,000; $40,000.
c. $67,500; $67,500.
d. $92,500; $42,500.
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Abdul-Rahim Taysir
Shelby | Mortonson | Total | |
Salary allowance | 60,000 | 0 | 60,000 |
Interest allowance | 30,000 | 40,000 | 70,000 |
Total | 90,000 | 40,000 | 130,000 |
Remaining income | 2,500 | 2,500 | 5,000 |
Total income distributed | $92,500 | $42,500 | $135,000 |
Shelby and Mortonson's respective shares are: $92,500; $42,500.
Correct option is (d)
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