Question

Juan and Carl have a small medical practice that operates as a partnership. Juan does 70% of the work and Carl does 30%. However, Carl invested 60% of the money required to start the business. If the company makes $100,000 in profit this year, how much will each partner receive?
a. Juan will receive $70,000; Carl will receive $30,000.
b. Juan will receive $50,000; Carl will receive $50,000.
c. Juan will receive $40,000; Carl will receive $60,000.
d. Juan will receive $60,000; Carl will receive $40,000.
e. Profits will be shared in the proportion specified in the partnership agreement.

Answer 1

Answer:

e. Profits will be shared in the proportion specified in the partnership agreement.

Explanation:

Partnership agreement is the governing document of an partnership. The agreement consist of how profit will be shared and has been agreed right before the partnership contract become become binding. Thus, the fact that Juan does 70% of the work and Carl does 30% of work does not specifies nor idicate profit sharing. Also, the fact that Carl invested 60% of the money required to start the business does not specify profit sharing as well. The profit sharing agreement is in the partnership agreement.