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21 October, 13:48

Patty and Paul are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000, respectively, on January 1. Income Summary has a credit balance of $40,000 at the end of the year. What is Paul's capital balance after closing Income Summary to the capital accounts? Group of answer choices

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  1. 21 October, 15:32
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    Paul account: 138,000

    Explanation:

    the income will be split in a 3:2 ratio between the partners

    3 + 2 = 5 parts in total

    from which Patty has 3 and Paul 2

    Paul participation on the distribution:

    40,000 income summary x 2/5 Paul's participation ratio = 8,000

    Paul's capital account after distribution: 130,000 + 8,000 = 138,000
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