The partnership contract for Pyle & Quan LLP provided that Pyle was to receive a

Question

The partnership contract for Pyle & Quan LLP provided that Pyle was to receive a salary of $12,000 a year, Quan was to receive a salary of $15,000 a year, and the resultant net income or loss after partners' salaries expense was to be divided 60% to Pyle and 40% to Quan. A partnership income of $20,000 before partners' salaries expense for the fiscal year ended May 31, 2006, is allocated:
$12,000 to Pyle and $8,000 to Quan
$8,889 to Pyle and $11,111 to Quan
$7,800 to Pyle and $12,200 to Quan
In some other amounts

Explanation / Answer

Answer: $7,800 to Pyle and $12,200 to Quan Pyle will receive a salary of 12,000, Quan will receive a salary of 15,000. The salaries equal 27,000. Subtracting the salaries from the income results in a loss of 7,000. 60% of the loss goes to Pyle. 60%*7000 = 4,200. So Pyle gets a total of 12,000 minus the loss of 4,200 = $7,800. 40% of the loss goes to Quan. 40%*7000 = 2,800. So Quan gets a total of 15,000 minus the loss of 4,800 = $12,200.

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