Laverne and Shirley started a partnership. Laverne invested $4,000 in the business and Shirley invested $6,000. The partnership agreement stipulated that profits would be divided as follows. Each partner would receive a 10% return on their invested capital with the remaining income being distributed equally between the two partners. Assuming that the partnership earned $4,500 during an accounting period, the amount of income assigned to the two partners would be:Laverne - Shirley a. $2, 250 - $2, 250 b. $1, 500 - $3,000 c. $2, 100 - $2, 400 d. $2, 150 - $2, 350
Amount of income assigned to Laverne = $2,150
Amount of income assigned to Shirley = $2,350
Explanation:
Given that,
Laverne invested = $4,000
Shirley invested = $6,000
Each partner receive = 10% return on their invested capital
and remaining income being distributed equally between the two partners.
Partnership earned = $4,500
Remaining income = Partnership earned - 10% on Laverne's capital - 10% on Laverne's capital
= $4,500 - $400 - $600
= $3,500
Amount of income assigned to Laverne:
= 10% of $4,000 + [tex]\frac{3500}{2}[/tex]
= $400 + $1,750
= $2,150
Amount of income assigned to Shirley:
= 10% of $6,000 + [tex]\frac{3500}{2}[/tex]
= $600 + $1,750
= $2,350