Question 3 (6 Marks)

Zilky and Justin formed a partnership on December 31, 2013. Zilky contributed $50,000 cash and accounts receivable with a fair market value of $10,000. Justin's investment consisted of: cash, $5,000; inventory, $34,000; and supplies, $1,000-all at fair market values. Profit for 2014 and 2015 was $50,000 and $65,000, respectively. Calculate the allocation of profit for 2014 and 2015, assuming profits are divided as follows: (A) The partners have no agreement. (B) Based on a 1:3 ratio. (C) Based on the ratio of the partners' original investments.