Partners a and B Have a Profit and Loss Agreement

question 16

Multiple Choice

Partners A and B have a profit and loss agreement with the following provisions: salaries of $20,000 and $25,000 for A and B, respectively; a bonus to A of 10% of net income after bonus; and interest of 20% on average capital balances of $40,000 and $50,000 for A and B, respectively. Any remainder is split equally. If the partnership had net income of $88,000, how much should be allocated to Partner A?

• A)$36,000
• B)$44,500
• C)$50,000
• D)$43,500

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Definitions:

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