Farrell and Jimmy enter into a partnership agreement on May 1,2018.Farrell contributes $30,000 and Jimmy contributes $140,000 as their capital contributions.They decide to share profits and losses in the ratio of their respective capital account balances.The net income for the year ended December 31,2018 is $40,000.Which of the following amounts should be credited to Jimmy's capital account? (Do not round any intermediate calculations.Round your final answers to the nearest dollar.)
A) $70,000
B) $40,000
C) $32,941
D) $7059

Question

Quizplus · Accepted Answer

Allocation based on capital balances uses the ratio of the partner's capital balance to the total capital. In this case, Total Capital = $170,000 ($140,000 + $30,000)
Jimmy's Capital balance = $140,000
Income allocated to Jimmy = ($140,000 / $170,000) × $40,000 = $32,941

Farrell and Jimmy Enter into a Partnership Agreement on May