Table 12-2
Tic, Tac, and Toe have year-end capital balances, before closing entries, of $202,000, $182,000, and $116,000, respectively. They have agreed to share profits and losses in the ratio of their capital balances.
-Refer to Table 12-2.Assuming the business earns a profit of $72,500,the amount allocated to Tic is:

Question

Quizplus · Accepted Answer

To find the amount allocated to Tic, first calculate the total capital which is $202,000 + $182,000 + $116,000 = $500,000. Tic's share of the capital is $202,000/$500,000 = 40.4%. Therefore, Tic's share of the profit is 40.4% of $72,500, which is approximately $29,290.

Table 12-2 Tic, Tac, and Toe Have Year-End Capital Balances, Before Closing