Question

Larry Curly, and Moe form a partnership on 01/01/2019. Terms of the written partnership agreement state that net income/loss is to be split in the ratio of 5:3:2, respectively, after salaries and 10% interest on beginnig-of-the-year capital balances are considered. On 01/01/2019, capital contributions by the three are as follows: Larry -- $50,000, Curly -- $70,000, Moe -- $90,000. Salaries paid during 2019 are as follows: Larry -- $40,000, Curly -- $45,000, Moe -- $60,000. Net income for the partnership for 2019 is $125,000. At 12/31/2019, after closing entries are made, what is the capital account for Curly? $62,500 $70,000 o $107,500 $151,000

Answer 1

Solution:

Schedule of Divison of income
Particulars	Larry	Curly	Moe	Total
Salary Allowance	$40,000.00	$45,000.00	$60,000.00	$145,000.00
Interest Allowance	$5,000.00	$7,000.00	$9,000.00	$21,000.00
Remaining income (5:3:2)	-$20,500.00	-$12,300.00	-$8,200.00	-$41,000.00
Net Income	$24,500.00	$39,700.00	$60,800.00	$125,000.00

Capital balance of curly after division of income = $70,000 + $39,700 = $109,700

Note: Answer given in options are not correct. Answer provided above is correct on the basis of available information.