Question

Patty and Paul are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000, respectively, on January 1. Income Summary has a credit balance of $40,000 at the end of the year. What is Paul’s capital balance after closing Income Summary to the capital accounts? Group of answer choices

Answer 1

Answer:

Paul account: 138,000

Explanation:

the income will be split in a 3:2 ratio between the partners

3 + 2 = 5 parts in total

from which Patty has 3 and Paul 2

Paul participation on the distribution:

40,000 income summary x  2/5 Paul's participation ratio = 8,000

Paul's capital account after distribution: 130,000 + 8,000 = 138,000