Question

Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries of $14,400 and $30,900, respectively. If the partnership suffers a $18,300 loss, by how much would Jason's capital account increase?

Answer 1

Answer:

Jason Capital account will be increase by $24,800.

Explanation:

Salary and profit/loss are transferred to the capital account of each partner on predetermined sharing ratio.

Partners              Franco       Jason

Share Ratio             2                 1

Salaries              $14,400    $30,900

Profit Sharing    ($12,200)  ($6,100)

Net Effect           $2,200    $24,800

Franco share = Total loss x Franco share ratio = $18,300 x 2/3 = $12,200

Jason share = Total loss x Jason share ratio = $18,300 x 1/3 = $6,100