Garlic, Pepper, and Salt are partners in a plumbing service.The business reported net income of $108,000 for 2014.The partnership agreement provides that profits and losses are to be divided equally after Pepper receives a $60,000 salary, Salt receives a $24,000 salary, and each partner receives 10% interest on his beginning capital balance.Beginning capital balances were $40,000 for Garlic, $48,000 for Pepper, and $32,000 for Salt.Pepper's share of partnership income for 2014 is:

Question

Quizplus · Accepted Answer

First, we need to calculate the total salary and interest for each partner:
- Garlic: $40,000 x 10% = $4,000 (interest) + $0 (salary) = $4,000
- Pepper: $48,000 x 10% = $4,800 (interest) + $60,000 (salary) = $64,800
- Salt: $32,000 x 10% = $3,200 (interest) + $24,000 (salary) = $27,200

Next, we need to subtract the total salary and interest for each partner from the net income:
Net income - (Total salary + Total interest)
$108,000 - ($60,000 + $4,000 + $64,800 + $3,200 + $24,000 + $4,000)
$108,000 - $160,000
-$52,000

Since the partnership agreement states that profits and losses are divided equally after the salaries and interest are paid, we need to divide the remaining -$52,000 by 3:
-$52,000 / 3 = -$17,333.33

Each partner will have a negative share of -$17,333.33, but we need to add this to their total salary and interest to get their final share:
- Garlic: $4,000 - $17,333.33 = -$13,333.33
- Pepper: $64,800 - $17,333.33 = $47,466.67
- Salt: $27,200 - $17,333.33 = $9,866.67

Therefore, Pepper's share of partnership income for 2014 is $47,466.67.

Garlic, Pepper, and Salt Are Partners in a Plumbing Service