Shelby and Mortonson Formed a Partnership with Capital Contributions of $300,000

question 72

Multiple Choice

Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Shelby to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Shelby and Mortonson's respective shares are:

• A) $67,500; $67,500.
• B) $92,500; $42,500.
• C) $57,857; $77,143.
• D) $90,000; $40,000.
• E) $35,000; $100,000.

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Definitions:

Financing Need

Refers to the amount of funding required by an entity to carry out its operations, investments, or to cover its expenses.

Equity

The ownership interest in a company, represented by the shares held by investors.

Financial Plans

Detailed strategies outlining how a business will manage its finances to achieve its objectives, including projections for income, expenses, and investments.

Sales Forecast

An estimate of the amount of goods or services a company expects to sell over a specific period, often used for budgeting and planning.