The partnership agreement of Rossi and Petry provides for salary allowances of $45,000 to Rossi and $35,000 to Petry, with the remaining income or loss to be divided equally. During the year, Rossi and Petry each withdraw cash equal to 80% of their salary allowances. If partnership net income is $100,000, Rossi's equity in the partnership would

Question

Quizplus · Accepted Answer

Rossi's equity increases more because both partners receive their salary allowances first, and then the remaining income is divided equally. Rossi's higher salary allowance means he receives more before the equal division of the remaining income.

The Partnership Agreement of Rossi and Petry Provides for Salary