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26 July, 08:27

Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries of $14,400 and $30,900, respectively. If the partnership suffers a $18,300 loss, by how much would Jason's capital account increase?

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  1. 26 July, 12:10
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    Jason Capital account will be increase by $24,800.

    Explanation:

    Salary and profit/loss are transferred to the capital account of each partner on predetermined sharing ratio.

    Partners Franco Jason

    Share Ratio 2 1

    Salaries $14,400 $30,900

    Profit Sharing ($12,200) ($6,100)

    Net Effect $2,200 $24,800

    Franco share = Total loss x Franco share ratio = $18,300 x 2/3 = $12,200

    Jason share = Total loss x Jason share ratio = $18,300 x 1/3 = $6,100
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