In: Accounting
QUESTION 4
Anna and Robert formed a partnership under which it was agreed that they share the profits and losses of the partnership equally. The partnership agreement allowed the partners to draw a salary if the partners so agreed. It was agreed at the beginning of the income year that Anna would draw a salary of $20,000, for managing the business, and that the balance of profits and losses would be shared equally. The current year’s net profit after paying Anna’s salary was $35,000.
What is Anna's distribution of the partnership net income?
$17,500 |
||
$20,000 |
||
$27,500 |
||
$37,500 |
The correct answer is | $37,500 | |
Anna | Robert | |
Salary Allowance | $20,000 | $0 |
Remaining Income 35,000 @ (1:1) | $17,500 | $17,500 |
Net Income | $37,500 | $17,500 |