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26 July, 12:42

Seth and Rachel have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder divided equally. How much of the net loss of $16,000 is allocated to Seth?

A. $4,000.

B. $6,000.

C. $16,000.

D. $8,000.

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  1. 26 July, 16:32
    0
    D. $8,000.

    Explanation:

    *Net loss is considered as the amount to be allocated between partners on equal sharing ratio. Otherwise the net allocated amount will be 76,000 (-16000-5000-10000-27000-18000) net loss and Seth's share will be - 38,000 (76000/2). Question has no option of this amount.

    Statement of Partners Equity

    For the Year end MM-DD-YY

    Seth Rachel

    $ $

    Beginning Capital balance = 0 0

    Investment by partners = 50,000 100,000

    interest Allowance = 5000 10,000

    Salary Allowance = 27000 18,000

    Net loss Allocated = (8,000) (8,000)

    Ending capital balance = 74,000 120,000
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