Mary and Paul Have Capital Account Balances at the End

question 26

Multiple Choice

Mary and Paul have capital account balances at the end of the year of
$100 000 and $80 000 respectively. Profit of the partnership is $90 000. The profit and loss sharing agreement calls for (1) a salary of $25 000 to Mary and $15 000 to Paul, (2) 10 % p.a. interest on capital balances, (3) the residual profit to be split 60:40 in favour of Mary. What is Mary's share of the distribution?

• A) $51 000
• B) $29 200
• C) $65 000
• D) $54 200

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