W. Bell and C. Quirk started a partnership in 2013. Because Bell contributed a larger amount toward the partnership at inception, the partnership agreement specified the following split of profits and losses in a two- phase allocation. The first allocation would split profits and losses in proportion to the partners' relative capital balances up to 20% of those balances. The remainder would be split evenly. At the end of the first year, the partnership had a loss of $40 000. Partners' capital balances were as follows: (This is not like the example in the chapter.) W. Bell: $102 000 C. Quirk: $18 000 How much of the loss was allocated to W. Bell?

Question

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The first allocation is 20% of the capital balances: Bell's share is $20,400 (20% of $102,000) and Quirk's share is $3,600 (20% of $18,000). The total of these allocations is $24,000. The remaining loss of $16,000 ($40,000 - $24,000) is split evenly, $8,000 each. Bell's total loss allocation is $20,400 + $8,000 = $28,400.

W Bell and C