White, Sands, and Luke has the following capital balances and profit and loss ratios:
$60,000 (30%); $100,000 (20%); and $200,000 (50%).
The partnership has received a predistribution plan.
How would $90,000 be distributed?

Question

Quizplus · Accepted Answer

According to the provided profit and loss ratios, the distribution of $90,000 would be:

- White: $27,000 (30% of $90,000)
- Sands: $18,000 (20% of $90,000)
- Luke: $45,000 (50% of $90,000)

However, the predistribution plan may allocate the distribution in a different manner. Option C shows a predistribution plan where each partner receives an equal amount of $30,000. This plan does not follow the profit and loss ratios, but it may have been agreed upon by the partners for other reasons. Therefore, Option C is the best choice as it satisfies the condition of being a valid predistribution plan.

White, Sands, and Luke Has the Following Capital Balances and Profit