Asked by Crystal Rivas on Jun 03, 2024
Verified
Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000, respectively. The partnership generated net income of $30,000. What is Saturn's capital balance after closing the revenue and expense accounts to the capital accounts?
A) $102,500
B) $120,000
C) $112,500
D) $127,500
Capital Balances
The amount of money that owners have invested in a company plus any retained earnings or losses.
Net Income
The total profit of a business after all expenses and taxes have been deducted from total revenue.
Closing the Revenue
The process of transferring the balances from the revenue accounts to permanent accounts at the end of an accounting period.
- Master and perform computations to adjust partners' capital balances subsequent to income dissemination.
Verified Answer
JT
Jazbeth TrevinoJun 10, 2024
Final Answer :
D
Explanation :
Saturn's share of the net income is calculated based on the income-sharing ratio of 3:1. The total shares are 3 + 1 = 4. Saturn's share is 1/4 of the net income. 1/4 of $30,000 is $7,500. Adding this to Saturn's original capital balance of $120,000 results in a new capital balance of $127,500.
Learning Objectives
- Master and perform computations to adjust partners' capital balances subsequent to income dissemination.