The partnership agreement for Smith Wesson & Davis, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Smith contributed $100,000, Wesson contributed $60,000 and Davis contributed $20,000. In the partnership's first year of operation, it incurred a loss of $210,000. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Smith?
A) $70,000
B) $116,667
C) $23,333
D) $105,000
E) $52,500

Question

Quizplus · Accepted Answer

The total contributions are $100,000 (Smith) + $60,000 (Wesson) + $20,000 (Davis) = $180,000. Smith's share of the contributions is $100,000/$180,000 = 5/9. Therefore, Smith's share of the $210,000 loss is 5/9 * $210,000 = $116,667, rounded to the nearest dollar.

The Partnership Agreement for Smith Wesson & Davis, a General