Patty and Paul are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000, respectively, on January 1. The partnership generated net income of $40,000 for the year. What is Paul's capital balance after closing the revenue and expense accounts to the capital accounts?

Question

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Paul's initial capital balance is $130,000. The net income of $40,000 is divided between Patty and Paul in the ratio of 3:2, which means Paul gets 2/5 of $40,000 = $16,000. Adding this to his initial capital balance, Paul's new capital balance is $130,000 + $16,000 = $146,000.

Patty and Paul Are Partners Who Share Income in the Ratio