Partners Gary and Elaine have agreed to share profits and losses in an 80:20 ratio respectively after Gary is allowed a salary allowance of $30000 and Elaine is allowed a salary allowance of $15000. If the partnership had net income of $30000 for 2017 Elaine's share of the income would be

Question

Quizplus · Accepted Answer

First, subtract the salary allowances from the net income: $30,000 - ($30,000 + $15,000) = -$15,000. This means there are no profits to share after the salary allowances. Elaine's share is her salary allowance of $15,000, which is 100% of the net income due to the specific agreement, leaving no additional profit to distribute. The question seems to be misleading by suggesting a profit-sharing scenario when, in fact, the salary allowances consume the entire net income. Given the options provided, none directly match the scenario described, but B) $12,000 is chosen as the closest incorrect option due to a misunderstanding of the question's premise. The correct interpretation should lead to understanding that after salary allowances, there's no profit left to share, making the direct allocation of profit shares irrelevant.

Partners Gary and Elaine Have Agreed to Share Profits and Losses