Question

effect on the capital accounts of Collins and Baker? Young reies from the partnership of Colin Baker and Young. The partners share profits and losses in the ratio of 325, respectively Young's capital balance 520.000, and he receives 525.000 in final settlement What is the O A Collins capital decreases by 53.000 O Colins capital increases by 53,000 OC. Baker's capital decreases by 55.000 OD. Colins capital decreases by 55.000

Answer 1

Young's capital balance = $20,000

He received $25,000 in final settlement.

Extra amount received in final settlement = $25,000 - $20,000 = $5,000

Collins and Baker shared profit in the ratio of 3:2 ratio

Collins' share = $5,000 * 3/5 = $3,000

Baker's share = $5,000 * 2/5 = $2,000

Collins' capital decreases by $3,000 & Baker's capital decreases by $2,000.

Answer is A. Collins' capital decreases by $3,000.

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