The profit and loss sharing agreement of the partnership of Ali, Bart, and Carrie provides a salary allowance for Ali and Carrie of $10,000 each. Partners receive a 10 percent interest allowance on their average capital balances for the year. The remainder is divided 40 percent to Ali, 20 percent to Bart, and 40 percent to Carrie. The December 31, 2011, after closing balances are as follows:

In January 2012 the partners are preparing to liquidate the business and discover that the year-end inventory was erroneously undervalued by $15,000, resulting in an error in calculating the 2011 netincome.

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Ali capital Net assets $150,000 $ 60,000 25,000 Carrie capital 65,000 $150,000