Partners Cantor and Dickens have capital balances in a partnership of $160000 and $240000 respectively. They agree to share profits and losses as follows: $\begin{array}{lrr}
& \underline{\text {Cantor}}& \underline{\text {Dickens}}\
\text { As salaries } & \$ 40,000 & \$ 48,000 \
\text { As interest on capital at the beginning of the year } & 10 \% & 10 \% \
\text { Remaining profits or losses } & 50 \% & 50 \%
\end{array}$
If income for the year was $200000 what will be the distribution of income to Dickens?

Question

Partners Cantor and Dickens have capital balances in a partnership of $160000 and $240000 respectively. They agree to share profits and losses as follows: $\begin{array}{lrr}
& \underline{\text {Cantor}}& \underline{\text {Dickens}}\
\text { As salaries } & \$ 40,000 & \$ 48,000 \
\text { As interest on capital at the beginning of the year } & 10 \% & 10 \% \
\text { Remaining profits or losses } & 50 \% & 50 \%
\end{array}$
 If income for the year was $200000 what will be the distribution of income to Dickens?

Quizplus · Accepted Answer

Total capital: 160000 + 240000 = 400000
Cantor's share: (160000/400000) x 100% = 40%
Dickens' share: (240000/400000) x 100% = 60%
Income for the year = $200,000
Distribution to Dickens = 60% x $200,000 = $120,000
However, the question asks for "distribution of income to Dickens" and not his total share. Therefore, we need to subtract his share of the loss (if any) from his total share, to get the actual distribution of income. But there is no information given about any losses. So we assume there are no losses.
Dickens' share of the income = 60% x $200,000 = $120,000
Therefore, the distribution of income to Dickens is $120,000 - $12,000 (his share of the loss, assuming there is no loss) = $108,000.
Hence, the best choice is B.

Partners Cantor and Dickens Have Capital Balances in a Partnership