Hodges and Burton formed a partnership with capital of $30 000 and $45 000 respectively. The partnership agreement provides for the crediting of annual salaries of $45 000 to Hodges and $75 000 to Burton. Each partner is entitled to 20% interest on capital. The remaining profit or loss is divided equally. How much, in total, will be credited to Hodges' capital account if profit for the year is $240 000 assuming capital balances are adjusted to reflect profits and losses?

Question

Quizplus · Accepted Answer

First, calculate the interest on capital for both partners: Hodges: $30,000 * 20% = $6,000 Burton: $45,000 * 20% = $9,000 Then, add the annual salaries: Hodges: $45,000 + $6,000 = $51,000 Burton: $75,000 + $9,000 = $84,000 Total allocated so far: $51,000 (Hodges) + $84,000 (Burton) = $135,000 The remaining profit to be divided equally: $240,000 - $135,000 = $105,000 Each gets half: $105,000 / 2 = $52,500 Adding Hodges' share of the remaining profit to his salary and interest: $51,000 + $52,500 = $103,500

Hodges and Burton Formed a Partnership with Capital of $30