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 incurs a loss of $87,000,Toe's share of the loss is:

Question

Quizplus · Accepted Answer

Toe's share of the loss is calculated based on the ratio of his capital balance to the total capital balance. Toe's capital is $116,000, and the total capital is $500,000 ($202,000 + $182,000 + $116,000). Toe's share of the loss is $87,000 * ($116,000 / $500,000) = $20,184.

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