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This post addresses a partnership loss allocation.

Bonny and Klyde entered into a partnership agreement and contributed the following amounts to the partnership. Bonny gave $65,000 cash to the new startup, and Klyde gave $35,000 cash. The partnership agreement states that income and losses are distributed based on their beginning capital balances.

At the end of the first quarter the company had a net loss of $18,000. Losses are common for new businesses but this one could be directly attributed to Klyde leaving $11,800 worth of inventory on the dock during a thunderstorm, thus ruining the items.

How much of the loss of this first quarter should be allocated to each partner?

Answer:
A. Bonny is allocated $7,670; Klyde is allocated $4,130
B. Bonny is allocated $9,000; Klyde is allocated $9,000
C. Bonny is allocated $5,900; Klyde is allocated $5,900
D. Bonny is allocated $11,700; Klyde is allocated $6,300

Solution Summary

The solution provides the correct answer for the multiple choice question which states, At the end of the first quarter the company had a net loss of $18,000. Losses are common for new businesses but this one could be directly attributed to Klyde leaving $11,800 worth of inventory on the dock during a thunderstorm, thus ruining the items.

How much of the loss of this first quarter should be allocated to each partner? Calculations to support the answer are also provided.

$2.19