Adjust net profit for partner appropriations before ratio sharing Steps:

• Net interest adjustment: drawings interest $20,000 minus capital interest$2,000 = $18,000 deduction from profit.
• Residual profit: $68,000 net profit minus$18,000 net interest minus $400 loan interest =$49,600.
• L's share of residual: 3/5 × $49,600 =$29,760. Why C is correct:
• Residual profit follows partnership appropriation by netting total capital credits against drawing charges, deducting loan interest as a prior claim, then applying the 3:2 sharing ratio to the balance. Why the others are wrong:
• A: $26,520 understates residual by over-deducting loan interest or misapplying ratio.
• B: $27,200 results from deducting full drawings without netting capital interest.
• D: $28,200 ignores netting and treats loan interest as part of L's share only. Final answer: C