On August 1,2017,Larry Goldstein and Rafi Hassan Created a Partnership

question 158

Essay

On August 1,2017,Larry Goldstein and Rafi Hassan created a partnership to produce software for online advertising.Goldstein was a lawyer and would handle all the legal matters,but Hassan was the technical whiz and would do all of the production and sales.Because most of the work would be done by Hassan,the partnership agreement specified that the yearly income would be split in a two-phase allocation.The first $100,000 of annual income would be split among Goldstein and Hassan in a 1:4 ratio (one part to Goldstein,four parts to Hassan).Any income above $100,000 would be split evenly.At the onset,both men contributed $200,000 to the partnership and made no draws during 2017.At the end of 2017,the partnership earned $175,000 of net income.At the end of 2017,after the year's income was distributed,what was the balance in owners' capital accounts?

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Definitions:

Mean

The average of a set of numbers, calculated by dividing the sum of all values by the number of values.

Median

A measure of central location provided by the value in the middle when the data are arranged in ascending order.

Uniform Distribution

A type of probability distribution in which all outcomes are equally likely.