Use the Following Information to Answer the Question(s) Below

question 42

Multiple Choice

Use the following information to answer the question(s) below.

Alfred and Barne share profits and losses in a ratio of 2:3, respectively, after salary allowances, interest allowances and bonus allocations. Alfred and Barne receive salary allowances of $30,000 and $60,000, respectively, and both partners receive 10% interest based upon the balance in their capital accounts on January 1. Partners' drawings are not used in determining the average capital balances. Total net income for 2014 is $180,000. If net income after deducting the interest and salary allocations is more than $60,000, Barne receives a bonus of 5% of the original amount of net income.

-If the partnership experiences a net loss of $60,000 for the year,what will be the final net amount of profit or (loss) closed to each partner's capital account?

• A)($90,000)to Alfred and $30,000 to Barne
• B)($30,000)to Alfred and ($30,000)to Barne
• C)($24,000)to Alfred and ($36,000)to Barne
• D)$30,000 to Alfred and ($90,000)to Barne

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Definitions:

Industry Entry

The process by which a business or company begins to operate in a specific industry.

Monopolistically Competitive

Refers to a market structure where many firms sell products that are similar but not identical, allowing them some power to set prices due to product differentiation.

Purely Competitive

A market structure characterized by many sellers offering identical products, with no single seller able to influence the market price.

Perfectly Elastic

A situation in which the quantity demanded or supplied responds infinitely or massively at a particular price point.