Partners A and B have a profit and loss agreement with the following provisions: salaries of $30,000 and $45,000 for A and B, respectively; a bonus to A of 12% of net income after salaries and bonus; and interest of 10% on average capital balances of $50,000 and $65,000 for A and B, respectively.One-fourth of any remaining profits are allocated to A and the balance to B.If the partnership had net income of $108,600, how much should be allocated to Partner A?

Question

Quizplus · Accepted Answer

Explanation:Partner A's share of the profit is calculated as follows:Salary: $30,000Bonus (12% of net income after salaries and bonus): $108,600 - $30,000 - $45,000 * 0.12 = $12,912Interest (10% on average capital balance): $50,000 * 0.10 = $5,000Allocation of remaining profits (1/4): ($108,600 - $30,000 - $45,000 - $12,912 - $5,000) * 0.25 = $3,816Total: $30,000 + $12,912 + $5,000 + $3,816 = $43,225

Partners a and B Have a Profit and Loss Agreement