Asked by Matthew Medina on Jun 18, 2024
Verified
Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug 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 $175,000 for its first year, what amount of income is credited to Krug's capital account?
A) $43,750.
B) $78,750.
C) $52,500.
D) $58,333.
E) $60,000.
Capital Invested
Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.
- Correctly determine and assign partnership earnings or losses in line with diverse agreement stipulations.
Verified Answer
AS
Austin SmithJun 25, 2024
Final Answer :
B
Explanation :
Krug's share = Krug's investment / Total investment * Total income = $270,000 / ($180,000 + $150,000 + $270,000) * $175,000 = $270,000 / $600,000 * $175,000 = 0.45 * $175,000 = $78,750.
Learning Objectives
- Correctly determine and assign partnership earnings or losses in line with diverse agreement stipulations.