Question

Cleary, Wasser, and Nolan formed a partnership on January 1, 2017, and made capital contributions of $100,000 (Cleary), $150,000 (Wasser), and $200,000 (Nolan), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $10,000 to Wasser; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Cleary; (b) 40% for Wasser; and (c) 40% for Nolan. Net income was $150,000 in 2017 and $180,000 in 2018. Each partner withdrew $1,000 for personal use every month during 2017 and 2018. What will be the amount of interest attributed to Cleary in the income distribution for 2019?

asked Sep 16, 2019, in Business by Localizer
a. $14,142.
b. $13,942.
c. $10,000.
d. $12,942.
e. $15,142.

Answer 1

Option C => $10,000.

Step-by-step explanation:

So, we are given the following Important data or information or parameters which are going to help us in solving the question above and they are;

(A). " Cleary, Wasser, and Nolan formed a partnership on January 1, 2017, and made capital contributions of $100,000 (Cleary), $150,000 (Wasser), and $200,000 (Nolan), respectively."

(B). The agreements are; '' (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $10,000 to Wasser; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Cleary; (b) 40% for Wasser; and (c) 40% for Nolan. Net income was $150,000 in 2017 and $180,000 in 2018."

From the observation (A) above, the capital contribution of Cleary = 100,000. And according to the agreement in (B), 10% will be shared to each partner’s beginning capital balance for the year. Therefore, for Cleary we have; 10% of 100,000 => $10,000.

For Wasser = 150000 x 10% = 15,000

For Nolan = 200000 x 10% = 20,000.