A partnership agreement specifies that Partner A receives 60% of profits and Partner B receives 40%. If the business shows a net profit of $180,000 for the year, how much does Partner B receive?
Correct Answer
B) $72,000
Partner B receives 40% of the $180,000 profit: $180,000 × 0.40 = $72,000. Partnership agreements typically specify how profits and losses are allocated among partners.
Why This Is the Correct Answer
Partner B receives 40% of the total net profit according to the partnership agreement. To calculate this, we multiply the total profit of $180,000 by Partner B's percentage share of 0.40 (which is 40% expressed as a decimal). This straightforward percentage calculation gives us $72,000 as Partner B's share of the profits.
Why the Other Options Are Wrong
Option C: $90,000
This would represent 50% of the profit ($180,000 × 0.50 = $90,000), suggesting an equal split, but the partnership agreement specifies a 60/40 split, not 50/50.
Option D: $60,000
This amount doesn't correspond to any logical percentage of the $180,000 profit and appears to be a distractor answer.
Memory Technique
Remember 'B gets 40, B gets less' - Partner B gets the smaller 40% share, so the answer should be less than half of the total profit.
Reference Hint
Business Law chapter covering Partnership Agreements and Profit/Loss Distribution
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