Accounting Midterm Exam ACG-2011: Question 21

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:

	$35,000; $100,000.
	$67,500; $67,500.
	$92,500; $42,500.
	$57,857; $77,143.
	$90,000; $40,000.

	Shelby	Mortonson	Total
Net income			$135,000
Salary allowance	$60,000		(60,000)
Interest allowance	30,000	$40,000	(70,000)
Balance of income			5,000
Balance divided equally	2,500	2,500	(5,000)
Total	$92,500	$42,500	$         0