Nancy and Betty Enter into a Partnership Agreement Whereby They

Nancy and Betty enter into a partnership agreement whereby they undertake to share profits according to the following rules: (a) Nancy and Betty will receive a salary of $1,500 and $13,500 respectively.
(b) The next allocation is based on 20% of the partner's capital balances.
(c) Any remaining profit or loss is to be borne completely by Betty.
The partnership's net income for the first year is $40,000. Nancy's capital balance is $90,000 and Betty's capital balance is $10,000 as at the end of the year. Calculate the share of profit/loss to be borne by Betty.

A) $19,500
B) $20,500
C) $4,000
D) $17,500

Correct Answer:

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