Fred and Barney started a partnership. During Year 1, Fred invested $9,000 in the business and Barney invested $17,500. The partnership agreement called for each partner to receive an annual distribution equal to $16% of his capital contribution. Any further earnings were to be retained in the business and divided equally between the partners. The partnership reported net income of $22,000 during Year 1. How will the $22,000 of net income be split between Fred and Barney respectively? (Hint: Consider both the cash withdrawals and allocation of remaining income.)

Fred

Barney

Multiple Choice

• $

  7,440

  $

  6,080

• $

  9,000

  $

  13,000

• $

  11,000

  $

  11,000

• $

  10,320

  $

  11,680