Question

Nancy and Betty enter into a partnership agreement where they decide to share profits according to the following rules: Nancy and Betty will receive salaries of $1, 300 and $13, 500 respectively as the first allocation. The next allocation is based on 10% of each partner's capital balances. Any remaining profit or loss is to be allocated completely to Betty. The partnership's net income for the first year is $40,000. Nancy's capital balance is $100,000 and Betty's capital balance is $11,000 as at the end of the year. Calculate the share of profit/loss to be allocated to Betty. (Round your answer to the nearest dollar.) $11,300 $10, 200 $28,700 $1,110

Answer 1

From the first condition, Nancy already has $1,300. From the second condition, Nancy will also receive 10% of her capital balance which is 10% of $100,000 or $10,000. In total, Nancy has a share of $11,300. So, Betty's share is the remaining amount from the $40,000 net income which is
$28,700