During the current year,Jacob,Alicia,and Shawn,who are partners in the JAS Company,had average capital balances of $57,000,$49,000,and $64,000,respectively.The partners share profits and losses by allowing a 12% return on average capital,with any remaining income or loss divided in a ratio of 5:3:2.If the company's income for the current year was $73,800,Shawn's capital account would increase by:

Question

Quizplus · Accepted Answer

First, we need to calculate the total allowable return on average capital for the year:

Total allowable return = (0.12)(57000 + 49000 + 64000) = $17,640

Next, we need to subtract the total allowable return from the company's income to determine the remaining profit to be divided according to the 5:3:2 ratio:

Remaining profit = $73,800 - $17,640 = $56,160

To determine how much of the remaining profit each partner will receive, we need to multiply the remaining profit by the ratio for each partner:

Jacob: (5/10)($56,160) = $28,080 
Alicia: (3/10)($56,160) = $16,848 
Shawn: (2/10)($56,160) = $11,232

Finally, we need to add each partner's share of the remaining profit to their allowable return to determine their total income for the year:

Jacob: $17,640 + $28,080 = $45,720 
Alicia: $17,640 + $16,848 = $34,488 
Shawn: $17,640 + $11,232 = $28,872

Since Shawn's capital account increased by $64,000 to start and his total income for the year was $28,872, his ending capital account balance would be:

Ending capital account balance = $64,000 + $28,872 = $92,872

Therefore, Shawn's capital account increased by $92,872 - $64,000 = $28,872, which is closest to answer B ($18,360).

During the Current Year,Jacob,Alicia,and Shawn,who Are Partners in the JAS