Fellows and Marshall are partners in an accounting firm and share net income and loss equally. Fellows' beginning partnership capital balance for the current year is $185,000, and Marshall's beginning partnership capital balance for the current year is $260,000. The partnership had net income of $350,000 for the year. Fellows withdrew $80,000 during the year and Marshall withdrew $70,000. What is Marshall's return on equity?

Question

Quizplus · Accepted Answer

Marshall's ending partnership capital balance = $260,000 + (1/2)($350,000) - $70,000 = $395,000
Marshall's average partnership capital = ($260,000 + $395,000) / 2 = $327,500
Marshall's return on equity = ($350,000 - $80,000 - $70,000) / $327,500 = 0.9538 = 95.38%
Marshall's return on equity as a percentage = 95.38% * 100% = 56.0%
Therefore, Marshall's return on equity is 56.0%.

Fellows and Marshall Are Partners in an Accounting Firm and Share