During 2016, the Tastee Partnership reported income before guaranteed payments of $92,000. Stella owns a 90% profits interest and works 1,600 hours per year in the business. Euclid owns a 10% profits interest and performs no services for the partnership during the year. For services performed in 2016, Stella receives a "salary" of $6,000 per month. Euclid withdrew $10,000 from the partnership during the year. If required, round your answers to the nearest dollar.

a. What is the amount of guaranteed payments made by the partnership during 2016?

b. How much is the partnership’s ordinary income after any deduction for guaranteed payments?

c. For 2016, how much income will Stella and Euclid report?

Stella: $

Euclid: $

Expert Answer

a. $72,000

b) $20,000

c) Stella $90,000

Euclid $2,000

Explanation:

a) The guaranteed payments in this scenario will be the salary that Stella receives per month. Stella is said to receive $6,000 per month.

The period is determined to be a year so she received $6,000 per month for 12 months.

= 6,000 * 12

= $72,000

b) With an income of $92,000, the partnership made guaranteed payments to Stella to the tune of $72,000. The amount after the payment is,

= 92,000 - 72,000

= $20,000

c) The Income after the Payments is $20,000.

Stella is said to have 90% of that so she gets,

= 20,000 * 90%

= $18,000.

Adding that to the $72,000 she was paid,

= 72,000 + 18,000

= $90,000

Stella will report $90,000 as income.

Euclid with 10% of the profit sharing ratio will report,

= 10% * 20,000

= $2,000

Euclid will report $2,000 as Net Income.

The $10,000 withdrawn by Euclid is not considered income.

being born in poverty would limit the people's chances, opportunities and benefits.

this happen because of several things, such as:

- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.

- poor people tend to socialize with other poor people while the rich tend to socialize with other rich people. this means that simply throguh their social circle, rich people would have more business opportunities compared to the poor people.

- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.

answer about 4-5 percent of the labor force is unemployed;