Nancy and Betty enter into a partnership agreement where they decide to share profits according to the following rules: (a)Nancy and Betty will receive salaries of $1700 and $14,500 respectively as the first allocation.
(b)The next allocation is based on 20% of each partner's capital balances.
(c)Any remaining profit or loss is to be allocated completely to Betty.
The partnership's net income for the first year is $50,000.Nancy's capital balance is $83,000 and Betty's capital balance is $11,000 at the end of the year.Calculate the share of profit/loss to be allocated to Betty.

Question

Quizplus · Accepted Answer

The allocation of profit or loss can also be based on a combination of services, capital balances, and stated ratios. A partnership might want to use this method if one partner contributes more capital but the other partner devotes more time to the business.
Calculation:
 11ea8873_d4c5_7b74_bb89_877a12067284_TB5026_00 Capital Allocation
 11ea8873_d4c5_7b75_bb89_c70cee62ab91_TB5026_00

Nancy and Betty Enter into a Partnership Agreement Where They