Question

he net income of the Travis and Tucker partnership is $125,000. The partnership agreement specifies that profits and losses will be shared equally after salary allowances of $100,000 (Travis) and $150,000 (Tucker) have been allocated. At the beginning of the year, Travis's Capital account had a balance of $250,000 and Tucker's Capital account had a balance of $325,000. What is the balance of Tucker's Capital account at the end of the year after profits and losses have been distributed

Answer 1

Answer:

The balance of Tucker's Capital account at the end of the year after profits and losses have been distributed is $412,500

Explanation:

The capital account of a partner in a partnership is an account that shows the equity ownership of that particular partner in the partnership.

The capital of a partner in the partnership is increased by additional cash capital or asset contribution, salary, share of profit, etc., while the capital is reduced by drawing, interest on drawing, share of loss, and others.

The balance of Tucker's Capital account at the end of the year after profits and losses have been distributed can be calculated as follows:

Tucker's Capital account

Particulars                                                $          

Beginning balance                            325,000

Salary                                                  150,000

Share of partnership loss (w.2)         (62,500)  

Ending balance                                  412,500  

Working:

1. Partnership profit (loss) to distribute = Net income - partners' salaries = $125,000 -  $100,000 - $150,000 = ($125,000)

2. Share of profit (loss) = ($125,000) / 2 = ($62,500)