Leigh Meadows and Byron Leef formed a partnership in which the partnership agreement provided for salary allowances of $35,000 and $25,000, respectively. Determine the division of a $20,000 net loss for the current year, assuming remaining income or losses are shared equally by the two partners. Use the minus sign to indicate any deductions or deficiencies.

Leigh is responsible for $5,000 in losses, and Byron for $15,000 in losses.

Explanation:

Since both income and losses are shared equally, we must first determine the partnership's total income:

Leigh Byron Total

salaries $35,000 $25,000 $60,000

net loss = income - total costs

-$20,000 = $60,000 - total costs

total costs = $60,000 + $20,000 = $80,000

divided by the 2 partners:

Leigh Byron Total

salaries $35,000 $25,000 $60,000

costs - $40,000 - $40,000 - $80,000

net loss - $5,000 - $15,000 - $20,000