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) $67,500.
B) $54,000.
C) $60,000.
D) $50,000.
E) $45,000.

Question

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) $67,500.
B) $54,000.
C) $60,000.
D) $50,000.
E) $45,000.

Quizplus · Accepted Answer

Lee's capital contribution is $270,000 out of a total of $600,000 ($180,000 + $150,000 + $270,000). The ratio of Lee's contribution is $270,000/$600,000 = 0.45. Therefore, Lee's share of the income is 0.45 * $150,000 = $67,500.

Cox, North, and Lee Form a Partnership