Use the following information to answer the question(s) below.

Bertram and Ernest share profits and losses equally after salary and interest allowances. Bertram and Ernest receive salary allowances of $40,000 and $60,000, respectively, and both partners receive 10% interest on their average capital balances. Average capital balances are calculated at the beginning of each month, regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month. Partners' drawings of $3,000 per month are not used in determining the average capital balances. Total net income for 2014 is $240,000.
Permanent withdrawals of capital:
Additional investments of capital:

-If the average capital for Bertram and Ernest from the above information is $224,000 and $238,000,respectively,what will be the total amount of profit allocated to salary and interest distributions?
A)$93,800
B)$146,200
C)$218,200
D)$240,000

Question

Use the following information to answer the question(s) below.

Bertram and Ernest share profits and losses equally after salary and interest allowances. Bertram and Ernest receive salary allowances of $40,000 and $60,000, respectively, and both partners receive 10% interest on their average capital balances. Average capital balances are calculated at the beginning of each month, regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month. Partners' drawings of $3,000 per month are not used in determining the average capital balances. Total net income for 2014 is $240,000.
 Permanent withdrawals of capital:
  Additional investments of capital:
 
-If the average capital for Bertram and Ernest from the above information is $224,000 and $238,000,respectively,what will be the total amount of profit allocated to salary and interest distributions?
A)$93,800 
B)$146,200 
C)$218,200 
D)$240,000

Quizplus · Accepted Answer

The total amount of profit allocated to salary and interest distributions is calculated by adding the average capitals of Bertram and Ernest, which are $224,000 and $238,000 respectively, giving a total of $462,000. Since the question asks for the total amount of profit allocated to salary and interest distributions, and not the total capital, we look for an option that could represent a reasonable percentage of profit distribution from the given capitals. Option B, $146,200, is the correct choice as it could represent a plausible profit distribution amount from the combined capitals of Bertram and Ernest.

Use the Following Information to Answer the Question(s) Below