Question

Katherine, Alliah, and Paulina form a partnership. Katherine contributes $150,000. Alliah contributes $150,000, and Paulina contributes $100,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital investment. If the partnership reports income of $90,000 for its first year of operations, what amount of income is credited to Katherine's capital account?

Answer 1

Answer:

$33,750

Explanation:

The computation of the amount of income which is credited to Katherine's capital account is shown below:

= (Katherine contribution ÷ total contribution) × partnership income

= ($150,000 ÷ $400,000) × $90,000

= $33,750

The total contribution equals to

= Katherine contribution + Alliah contribution + Paulina contribution

= $150,000 + $150,000 + $100,000

= $400,000