Question

Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $150,000 for its first year, what amount of income is credited to Cox's capital account? Multiple Choice $50,000.

$64,286.

$45,000.

$36,000.

$60,000.

Answer 1

Answer

--Correct Answer = Option #3: $ 45,000 will be credited to Cox's capital account.

		Cox	North	Lee	Total
A	Capital contribution	$180,000	$150,000	$270,000	$600,000
B = A/$600000	Ratio of Capital (% of total)	30%	25%	45%	100%
C	Reported Net Income	$150,000	$150,000	$150,000	$150,000
D = C x D	Net Income credited	$45,000 ANSWER	$37,500	$67,500	$150,000