Red and White formed a partnership in 2006. The partnership agreement provides for annual salary allowances of $55,000 for Red and $45,000 for White. The partners share profits equally and losses in a 60/40 ratio. The partnership had earnings of $80,000 for 2006 before any allowance to partners. What amount of these earnings should be credited to each partner’s capital account?
align=”left”>
|
Red |
White |
|
|
a. |
$40,000 |
$40,000 |
|
b. |
$43,000 |
$37,000 |
|
c. |
$44,000 |
$36,000 |
|
d. |
$45,000 |
$35,000 |