Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $150,000 for its first year, what amount of income is credited to Lee's capital account? (Do not round your intermediate calculations.)
A) $50,000.
B) $67,500.
C) $45,000.
D) $54,000.
E) $60,000.

Question

Quizplus · Accepted Answer

The total capital invested by the three partners is $600,000 ($180,000 + $150,000 + $270,000). 
So, Cox's capital ratio is 30% ($180,000/$600,000), North's is 25% ($150,000/$600,000), and Lee's is 45% ($270,000/$600,000).

The partnership's income of $150,000 will be divided among the partners based on their capital ratios. 
Lee's share of the income will be 45% of $150,000, which is $67,500.

Therefore, the amount of income credited to Lee's capital account is $67,500.

Cox, North, and Lee Form a Partnership