Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $150,000 for its first year, what amount of income is credited to North's capital account? A. $61,500.

B. $63,500.

C. $50,000.

D. $47,500.

E. $45,000.

Question

Stephanie Hobbs

Business

4 March, 18:47

Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $150,000 for its first year, what amount of income is credited to North's capital account? A. $61,500.

B. $63,500.

C. $50,000.

D. $47,500.

E. $45,000.

+2

Answers (1)

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April Lozano · Answer 1

D. $47,500.

Explanation:

Cox North Lee

Contribution $180,000 $150,000 $270,000

Interest On Capital balance $9,000 $7,500 $13,500

Profit Allocation (Equally) $40,000 $40,000 $40,000

Amount of Income credited to North's account = $7500 + $40,000 = $47,500

Allocated Profit = $150,000 - ($9,000+$7,500+$13,500) = $120,000

Equal Distribution = $120,000 / 3 = $40,000