Question

Lara is 50% partner in Diana"s Deli. She is so to recieve a guaranty payment of $20000 if the parnership'sordinary income before deducting the guaranteed payment is $50000, what is Lara's distributiveshare?

Answer 1

Answer: ?In case of Partnership Guaranty payment means the partner is entitled to get a certain amount even if the actual share of profit is lower than that amount. In such a case other partners gives the guaranty to one or more partner for a minimum amount of share of profit. If the actual share of profit of the guaranteed partner is lower than the guaranty amount then the balance is to be compensated by the other partners bringing cash in, but if the Actual share of profit is greater than the guaranty amount then the the guaranteed partner will get that higher amount as share of profit.

Computation of Distributive share of Lara:

?Income before deducting guaranty payment = $50,000

Lara's Distributive share = $50,000 X 50% = $25,000

** As the Distributive share comes to $25,000, which is higher greater than his/her Guaranty payment.

In this situation he/she will get the actual share of profit, i.e $25,000. If the distributive share would have been less than $20,000 then he/she will get $20,000 as his distributive share and the deficit is to be compensated by bringing in cash by the other partners.

Thank You.