Question

Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Shelby to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Shelby and Mortonson's respective shares are:
Select one:
a. $57,857; $77,143.
b. $90,000; $40,000.
c. $67,500; $67,500.
d. $92,500; $42,500.

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Abdul-Rahim Taysir

Answer 1

	Shelby	Mortonson	Total
Salary allowance	60,000	0	60,000
Interest allowance	30,000	40,000	70,000
Total	90,000	40,000	130,000
Remaining income	2,500	2,500	5,000
Total income distributed	$92,500	$42,500	$135,000

Shelby and Mortonson's respective shares are:  $92,500; $42,500.

Correct option is (d)