Answered: Chloe is a managing partner of a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Chloe is a managing partner of a certain partnership. She receives a bonus as part of her profit and loss allocation. Chloe’s bonus is based on increase in revenues recorded during the period. The bonus arrangement is that Chloe receives 1% on net income for every full percentage point growth in
revenues in excess of a five percent revenue growth. During the most recent period, revenues grew from $1,000,000 to $1,080,000 and the net income grew from $196,000 to $240,000. What amount of bonus will Chloe receive this period?

A. 2,200 B. 4,000 C. 7,200 D. 12,000

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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