B.Jones and R.Tate began a partnership in 2014.Jones would do a larger portion of the partnership work,and Tate would make a larger cash contribution,and so the partnership agreement specified a profit split to recognize that situation.Profits will be split in a two-step allocation.The first step will allocate partnership profits based on 5% of each partner's capital balance.The second step will allocate remaining amounts in a ratio of 4:1 respectively.Data at the end of the first year are as follows: $$\begin{array} { | l | r | }
\hline \text { Partnership profits to allocate: } & \$ 24,000 \
\hline \text { Tones's capital balance: } & \$ 36,000 \
\hline \text { Tate's capital balance: } & \$ 120,000 \
\hline
\end{array}$$ How much of the partnership income will be allocated to Jones?

Question

B.Jones and R.Tate began a partnership in 2014.Jones would do a larger portion of the partnership work,and Tate would make a larger cash contribution,and so the partnership agreement specified a profit split to recognize that situation.Profits will be split in a two-step allocation.The first step will allocate partnership profits based on 5% of each partner's capital balance.The second step will allocate remaining amounts in a ratio of 4:1 respectively.Data at the end of the first year are as follows: $$\begin{array} { | l | r | } 
\hline \text { Partnership profits to allocate: } & \$ 24,000 \
\hline \text { Tones's capital balance: } & \$ 36,000 \
\hline \text { Tate's capital balance: } & \$ 120,000 \
\hline
\end{array}$$ How much of the partnership income will be allocated to Jones?

Quizplus · Accepted Answer

First, calculate 5% of each partner's capital balance: Jones: $36,000 * 0.05 = $1,800 Tate: $120,000 * 0.05 = $6,000 Total allocated in the first step: $1,800 + $6,000 = $7,800 Remaining profit to allocate: $24,000 - $7,800 = $16,200 Allocate the remaining profit in a 4:1 ratio: Total parts = 4 + 1 = 5 Part value = $16,200 / 5 = $3,240 Jones's share of the remaining profit: 4 parts * $3,240 = $12,960 Total allocated to Jones: $1,800 (first step) + $12,960 (second step) = $14,760

BJones and R How Much of the Partnership Income Will Be Allocated to a Larger