Pac-Link Technologies Is a Partnership Owned and Operated by Tom

question 95

Essay

Pac-link Technologies is a partnership owned and operated by Tom Kennedy and Mike McConnell. To recognize the fact that the partners have invested significantly different amounts of capital and that Tom works full time, while Mike works only part time, the partnership agreement states that the profit will be allocated as follows: An interest allowance of 3% of each partner's beginning capital balance plus a salary allowance of $85 per hour worked. Any remaining profit or loss after calculation of these allowances will be allocated equally. At January 1, 2014, Tom's capital account balance was $15,000 and Mike's was $20,000. During the year ended December 31, 2014, Tom worked 1,200 hours and Mike worked 550 hours.
Instructions
a. Calculate each partner's share of profit assuming that profit for the year ended December 31, 2014 is $196,000.
b. Calculate each partner's share of profit assuming that profit for the year ended December 31, 2014 is $88,000.

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Definitions:

English Settlers

The early colonists from England who established settlements in what would become the United States during the 17th and 18th centuries, significantly impacting Native American lands and cultures.

Seventeenth Century

The period from 1601 to 1700, marked by significant developments in various fields such as science, politics, and exploration.

North American

Refers to anything related to the continent that comprises the northern part of America, including Canada, the United States, Mexico, and Greenland.

Virginia Company

The Virginia Company was a joint-stock company chartered by King James I of England in the early 17th century with the purpose of establishing settlements on the coast of North America.