Question

Cox, North, and Lee form a partnership. Cox contributes $183,000, North contributes $152,500, and Lee contributes $274,500. 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 $172,000 for its first year, what amount of income is credited to Lee's capital account

Answer 1

Answer:

$77,400

Explanation:

Lee's ratio = $274,500 / ($183,000 + $152,500+ $274,500)

Lee's ratio = $274,500 / $610,000

Lee's ratio = 0.45

Lee's ratio = 45%

Lee's ratio  = Lee's profit ratio

If the partnership reports income of $172,000.

Lee's income will be = 45%*$172,000 = $77,400

Thus, the amount of income to be credited to Lee's capital account is $77,400