Michael,Zoe and Perry are partners in the Andover Company.Their partnership income sharing agreement provides that Michael and Zoe are to receive salary allowances of $15,000 and $18,000,respectively,and that any remaining income or loss is to be divided equally among all partners.If the company had a loss of $30,000,Zoe's capital account would:

Question

Quizplus · Accepted Answer

First, allocate the salary allowances to Michael and Zoe: Michael gets $15,000 and Zoe gets $18,000. The total loss is $30,000, which means after allocating the salary allowances, there's a remaining loss of $30,000 - ($15,000 + $18,000) = -$3,000. Since the remaining loss is to be divided equally among all three partners, each partner bears an additional $1,000 loss. Therefore, Zoe's share of the loss is her salary allowance minus her share of the loss: $18,000 - $1,000 = $17,000. Since her capital account decreases by the $1,000 share of the loss, the correct answer is D) decrease by $3,000.

Michael,Zoe and Perry Are Partners in the Andover Company