Reference no: EM132620904

Stephanie Barnes and Layla Taylor formed a partnership, Design Pros Imaging, last May. Each person contributed assets to the business and both partners work full-time in the business. The business made a profit in the first year, which ended Dec. 31, but Layla and Stephanie are still discussing how to divide the net income equitably. The following table shows some options that their accountant worked up. Unfortunately, the accountant's notes about each option have been lost. Stephanie remembers that the accountant proposed paying 4% interest yearly on each partner's capital investment at the beginning of the year. Layla asked the accountant to include at least one bonus option. The accountant used last year's results to show how the net income would have been divided under each option.

Question 1: What was the net income for Design Pros Imaging last year?

Question 2: Which option shows how the net income will be split if the partners do not reach an agreement?

Question 3: What do the negative amounts represent?

a. The amount needed to be profitable.

b. Excess of allowances over income.

c. A capital loss.

d. A business loss.

e. Net income.

Question 4: What is the last item in Option E that is divided between the partners?

a. Remaining net income.

b. Services of the partners.

c. Salary after expenses.

d. Interest earned.

e. Net income.