Nancy and Peter Enter into a Partnership and Decide to Share

question 16

Multiple Choice

Nancy and Peter enter into a partnership and decide to share profits and losses as follows: 1.The first allocation is a salary allowance with Nancy receiving $13,000 and Peter receiving $11,000.
2) The second allocation is 15% of the partners' capital balances at year end.On December 31,2019,the capital balances for Nancy and Peter are $82,000 and $18,000,respectively.
3) Any remaining profit or loss is allocated equally.
For the year ending December 31,2019,the partnership reported a net loss of $147,000.What is Peter's share of the net loss?

• A) $13,700
• B) $54,000
• C) $5800
• D) $67,700

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Definitions:

Specialization

The practice of focusing effort and resources on a particular task or area of production to increase efficiency and output.

Increasing Opportunity Costs

The principle that the more a society tries to produce of a specific good, the higher the opportunity cost of further increasing its production.

Production Possibilities Curves

A curve depicting all maximum output possibilities for two goods, given a set of inputs, highlighting the trade-offs in production choices.

Domestic Supply Curves

Graphical representations of the relationship between the price of a good or service and the quantity of that good or service supplied domestically.