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Assume that there are three partners in a partnership, A, B, and C. Partner C provides...

Assume that there are three partners in a partnership, A, B, and C. Partner C provides services to the partnership and is entitled to a salary of $90,000. Assume that the partnership revenues less expenses (other than salary to Partner C) amount is $480,000. Finally, assume that the Partnership Agreement provides for a sharing ratio of 40:40:20 for Partners A, B, and C, respectively. How much profit should be allocated to each partner?

a. Partner A gets $156,000, Partner B gets $156,000, and Partner C gets $168,000

b. Partner A gets $160,000, Partner B gets $160,000, and Partner C gets $160,000

c. Partner A gets $190,000, Partner B gets $190,000, and Partner C gets $190,000

d. Partner A gets $192,000, Partner B gets $192,000, and Partner C gets $96,000

e. None of the Above

Business   Accounting   
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Answer #1

a. Partner A gets $156,000, Partner B gets $156,000, and Partner C gets $168,000

Explanation:

Profit before salary of C = $480,000

Profit after salary of C = $480,000 - $90,000 = $390,000

Profit after Salary of c should be distributed amoung parther as partnersheip agrrement.

so, Profit Share of A = $390,000 * 40/100

= 156,000

Profit Share of B = $390,000 * 40/100

  = 156,000

Profit sahre of C = Salary + $390,000*20/100

= $90,000 + 78,000

=$168,000

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