. Shelby and Mortonson formed a partnership with capital contributions of $300,0

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:

A. $67,500; $67,500.
B. $92,500; $42,500.
C. $57,857; $77,143.
D. $90,000; $40,000.
E. $35,000; $100,000.

Please provide explanation of answer

Explanation / Answer

B. $92,500; $42,500 Shelby Net income Salary allowance $60,000 Interest allowance 30,000 Balance divided equally 2,500 Total =60000+ 30000+2500=$92,500

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