In 2013, A. Mernick and L. Gold entered into a partnership to develop real estate projects. Due to their respective roles in the business, the partnership agreement specifies a two- phase profit split. The first $90 000 will be split in a ratio of 1:2 to Mernick and Gold, respectively. All profits over $90 000 will be split equally. During 2013, the following transactions took place:
Total partnership profit was $110 000. Mernick took withdrawals of $32 000. Gold took withdrawals of $50 000.
How much profit was credited to Gold's capital account?

Question

Quizplus · Accepted Answer

The first $90,000 of profit is split 1:2 between Mernick and Gold, respectively. This means that Mernick receives $30,000 (1/3 of $90,000) and Gold receives $60,000 (2/3 of $90,000). The remaining profit of $20,000 is split equally, so each partner receives $10,000. Therefore, Gold's total profit is $60,000 + $10,000 = $70,000.