Nancy and Betty Enter into a Partnership Agreement Where They

question 43

Multiple Choice

Nancy and Betty enter into a partnership agreement where they decide to share profits according to the following rules: (a) Nancy and Betty will receive salaries of $1700 and $14,500 respectively as the first allocation.
(b) The next allocation is based on 20% of each partner's capital balances.
(c) Any remaining profit or loss is to be allocated completely to Betty.
The partnership's net income for the first year is $50,000.Nancy's capital balance is $83,000 and Betty's capital balance is $11,000 at the end of the year.Calculate the share of profit/loss to be allocated to Betty.

• A) $18,300
• B) $31,700
• C) $3760
• D) $16,100

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Definitions:

Employee Advance

A prepayment to employees by a company, often covering travel expenses or payment before the regular payroll date.

Notes Receivable

Claims held by a party for payments due from debtors, usually evidenced by a formal instrument of indebtedness such as a promissory note.

Allowance Method

An accounting approach to managing bad debts by estimating and recording uncollectable accounts receivable as an expense before the debts are known to be uncollectable.

Bad Debts Expense

The cost associated with the portion of accounts receivable that is estimated to be uncollectible during a fiscal period.