Zheng Invested $100,000 and Murray Invested $200,000 in a Partnership

question 14

Multiple Choice

Zheng invested $100,000 and Murray invested $200,000 in a partnership.They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray,plus an interest allowance on the partners' beginning-year capital investments at 10%,with the balance to be shared equally.Under this agreement,the shares of the partners when the partnership earns $105,000 in income are:

• A)$52,500 to Zheng;$52,500 to Murray.
• B)$35,000 to Zheng;$70,000 to Murray.
• C)$57,500 to Zheng;$47,500 to Murray.
• D)$42,500 to Zheng;$62,500 to Murray.
• E)$70,000 to Zheng;$60,000 to Murray.

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Definitions:

Units-Of-Output Method

A depreciation method where the expense is based on the actual output or usage of the asset, rather than the passage of time.

Double-Declining-Balance Method

A method of accelerated depreciation that doubles the straight-line depreciation rate, leading to higher depreciation expenses in the initial years of asset use.

Straight-Line Method

A method of allocating the cost of a tangible asset over its useful life in equal periodic amounts.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts, making it the simplest form of depreciation.