REFERENCE: Ref.14_02 a Partnership Began Its First Year of Operations with the with the Following

question 51

Multiple Choice

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
-What was Young's share of income or loss for the second year?

• A)$17,160 income.
• B)$4,160 income.
• C)$19,760 income.
• D)$17,290 income.
• E)$28,080 income.

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Definitions:

Real Interest Rate

The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to savers.

Nominal Interest Rate

The interest rate as stated without adjustment for inflation, representing the actual percentage amount charged for borrowing money.

Inflation Rate

The percentage increase in the price level of goods and services in an economy over a given period of time.

Nominal Interest Rate

The percentage increase in money that borrowers pay to lenders, not adjusted for inflation.