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

question 83

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

---

Definitions:

Fixed Costs

Expenses that do not change with the level of output produced, such as rent, salaries, and insurance.

Real Opportunity Cost

The value of the best alternative forgone as a result of making a particular choice, expressed in terms of real goods and services.

Producing Product

The process of creating goods or services that are offered in the market for consumption or use.

Resources

Assets or inputs used to produce goods and services.