ABCD Company is a general partnership. It consists of Dianne, Greg, Knox, and Laura, whose capital contributions were as follows: Dianne, $5,000; Greg, $7,500; Knox, $10,000; and Laura, $5,000. The partnership agreement provided that the partnership would continue for three years and that no withdrawals of capital were to be made without the consent of all the partners.
The agreement also provided that all advances would be entitled to interest at 10 percent per year. Six months after the partnership was formed, Dianne advanced $10,000 to the partnership.
At the end of the first year, net profits totaled $11,000 before any moneys had been distributed to partners. How should the $11,000 be allocated to Dianne, Greg, Knox, and Laura? Explain.