Bob Freeley and Jack Hart form a partnership, investing $25,000 and $100,000, respectively.
Requirement
1. Determine their shares to the net income or net loss for each of the following independent situations:
a. Net loss is $130,000 and the partners have no written partnership agreement.
b. Net income is $50,000, and the partnership agreement states that the partners share profits and losses on the basis of their capital balances.
c. Net income is $140,000. The first $84,000 is shared on the basis of partner capital balances. The next $42,000 is based on partner service, with Freeley getting 25% and hart 75%. The remainder is shared equally.