Sadie and Sam share income equally. For the current year, the partnership net income is $40,000. Sadie made withdrawals of $14,000 and Sam made withdrawals of $15,000. At the beginning of the year, the capital account balances were: Sadie, Capital, $42,000; Sam, Capital, $58,000. Sam's capital account balance at the end of the year is

Question

Quizplus · Accepted Answer

Since Sadie and Sam share income equally, they each should have added $20,000 to their capital account (half of the $40,000 net income). 
Sadie's capital account should be: 
$42,000 (beginning balance) + $20,000 (her share of the net income) - $14,000 (withdrawals) = $48,000

Sam's capital account should be: 
$58,000 (beginning balance) + $20,000 (his share of the net income) - $15,000 (withdrawals) = $63,000

Sadie and Sam Share Income Equally