Hay, Straw and Clover formed the HSC Partnership, agreeing to share profits and losses equally. Clover will manage the business for which he will receive a guaranteed payment of $30,000 per year. Cash receipts and disbursements for the year were as follows
Net income from operations (before guaranteed payment) $ 90,000
Guaranteed payment to Clover 30,000
What is Clover's share of the partnership's ordinary income and guaranteed payment?
A) Ordinary income, $30,000; Guaranteed payment, $10,000.
B) Ordinary income, $20,000; Guaranteed payment, $10,000.
C) Ordinary income, $30,000; Guaranteed payment, $30,000.
D) Ordinary income, $20,000; Guaranteed payment, $30,000.

Question

Quizplus · Accepted Answer

Ordinary income is $60,000 ($90,000 - $30,000). Clover is allocated 1/3 of the ordinary income and all of the guaranteed payment.

Hay, Straw and Clover Formed the HSC Partnership, Agreeing to Share