Asked by Haley Althaus on May 04, 2024
Verified
Paul and Roger are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000, respectively. The partnership generated net income of $50,000 for the year. What is Roger's capital balance after closing the revenue and expense accounts to the capital accounts?
A) $155,000
B) $150,000
C) $110,000
D) $115,000
Net Income
A company's profit remaining after all expenses, taxes, and losses have been deducted.
Capital Balances
The amount of money that owners have invested in a company, minus any withdrawals, often shown in the equity section of the balance sheet.
Closing the Revenue
The process of finalizing all revenue transactions within a given period, marking the end of a business's revenue cycle for that timeframe.
- Comprehend and compute adjustments to partners' capital balances following the distribution of income.
Verified Answer
ON
Overlooked Nomore
May 10, 2024
Final Answer :
B
Explanation :
Roger's share of the net income is calculated based on the income-sharing ratio. The total income to be shared is $50,000, with a sharing ratio of 3:2. This means Roger gets 2 parts of every 5 parts of income. Calculating his share: (2/5) * $50,000 = $20,000. Adding this to his original capital balance of $130,000 gives $150,000.
Learning Objectives
- Comprehend and compute adjustments to partners' capital balances following the distribution of income.