Partnership net income of $45,000 is to be divided between two partners, Erin Kelly and Kathryn Morgan, according to the following arrangement: There will be salary allowances of $28,000 for Kelly and $20,000 for Morgan, with the remainder divided equally per their partnership agreement. How much of the net income will be distributed to Kelly and Morgan, respectively?

Question

Quizplus · Accepted Answer

First, we need to subtract the salary allowances from the net income:
$45,000 - $28,000 - $20,000 = $-3,000
Uh oh, we have a negative number. This means that the salary allowances are actually greater than the net income after deducting them. In this case, the partners would not receive any additional distribution beyond their salary allowances, resulting in Erin Kelly receiving $28,000 and Kathryn Morgan receiving $20,000. However, if we assume that the total net income was actually greater than $48,000, then we could proceed to divide the remaining amount equally per their agreement. But since we don't have enough information to make that assumption, the best choice is D because it accounts for the fact that the remaining amount is negative.

Partnership Net Income of $45,000 Is to Be Divided Between