Seth and Beth have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder to be divided equally. How much of the net income of $42,000 is allocated to Seth?

Question

Quizplus · Accepted Answer

1. Calculate the total interest on original investment:
    Seth: $50,000 x 10% = $5,000
    Beth: $100,000 x 10% = $10,000
    Total = $5,000 + $10,000 = $15,000

2. Subtract the total interest from the net income:
    $42,000 - $15,000 = $27,000

3. Subtract the salary allowances:
    $27,000 - $27,000 - $18,000 = $9,000

4. Divide the remaining income equally:
    $9,000 / 2 = $4,500

5. Add Seth's interest and his share of the remaining income:
    $5,000 + $4,500 = $9,500

Therefore, Seth's allocated net income is $9,500, which corresponds to choice B.

Seth and Beth Have Original Investments of $50,000 and $100,000