Tucker and Titus are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000, respectively. The partnership generated net income of $40,000 for the year. What is Tucker's capital balance after closing the revenue and expense accounts to the capital accounts?

Question

Quizplus · Accepted Answer

First, we need to determine how much of the net income each partner is entitled to. To do this, we add the ratio (3+1=4), and divide the total net income by that ratio: 
$40,000 ÷ 4 = $10,000

Now we can divide the net income between the two partners using their profit-sharing ratio: 
Tucker: $10,000 × 3/4 = $7,500 
Titus: $10,000 × 1/4 = $2,500

We add each partner's share of the net income to their beginning capital balance to get their ending capital balance: 
Tucker: $40,000 + $7,500 = $47,500 
Titus: $60,000 + $2,500 = $62,500

Therefore, Tucker's capital balance after closing the revenue and expense accounts to the capital accounts is $47,500.

Tucker and Titus Are Partners Who Share Income in the Ratio